by Andrew Shadrake
My colleague Jay Tompt recently commented that this is the moment when many of the community-led solutions to our economic ills are needed and the conditions for building long term change are favourable. In this post, I’ll highlight how true that could be for community enterprises which know each other well, and need to keep supporting their communities through the COVID crisis.
Community enterprises will know that they are eligible for the Coronavirus Job Retention Scheme in the same way as any other enterprise. Under the scheme, they can claim 80% of wages, employer national insurance and pension contributions for any employee who is “furloughed” for at least three weeks.
They will also know about the scheme’s shortcomings. An employee cannot work at all for the employer’s business (or any associated or linked business) while furloughed. That might sound reasonable, but the employer still has to pay the remaining 20% of their wages etc, while the employee is unable to contribute anything. The only exception is where the employee agrees to a 20% pay cut – not something most community business employees can afford.
This is, of course, madness. Community enterprises exist to serve and support the communities where they operate. Furloughing staff may be the only way they can survive, but by preventing furloughed staff working, they remove often vital community support when it is needed most.
There are other problems with the scheme. One is that the compensation for pension contributions is capped at 80% of the minimum automatic enrolment employer pensions contribution (3%). Some community businesses may be contributing more than this. Another is that the benefit of reimbursed employer national insurance (NI) is limited for most community enterprises, because they will receive £4000 tax relief on contributions anyway. The government expects this to mean the 655,000 smallest businesses will pay no employer NI in 2020.
It looks like there is some good news though. For one thing, employees can undertake training while they are furloughed, which could benefit them and the community enterprise.
For another, and this is where it gets particularly interesting, furloughed employees can volunteer for another business. The other business must not be linked to, or associated with, the one they work for (see the caveat at the end of this post).
Let’s assume there are two community enterprises, which know and trust each other, but are not linked to, or associated with each other. (Being connected through the Torbay Social Enterprise Network, for example.) Let’s assume the employees have skills which can be transferred between the two enterprises. In that case, furloughed employees could swap places, if they wanted to do so, each volunteering for the enterprise they do not work for.
Of course, this is not likely to be a perfect solution. With the best will in the world, employees are likely to be less efficient in the enterprise where they are volunteering. All the same, this approach has two advantages for each business. The first is that the volunteers may well be at least 20% as efficient as the original employees, so helping to compensate for the employer’s 20% contribution to furloughed employee costs.
The second advantage, which is much more important to the people the community enterprise serves, is that it can continue to operate, delivering its services to those who need it.
It is worth mentioning a variation on this theme. If the original employer agrees, the furloughed employee could be employed by the second business (any employment must be in line with the latest public health guidance during the COVID-19 outbreak).
Where community businesses and their employees are able to cooperate in the way this post suggests, they will show, once more, the resilience of the community enterprise sector. Survival through co-operation is a very good thing. Continuing to deliver great social impact through this enormously challenging time is a great thing.
CAVEAT: This post contains the opinion of its author – it is not legal advice. If your enterprise would like to take the approach suggested, they should first approach a solicitor or other expert to confirm they can do so and comply with the rules. In particular, they need to check that the two businesses are not linked. At the date of this writing (24th April 2020), there was no definition of “linked” in government guidance.