Doing the Right Thing

01 June 2020

Thanks @Sasin Tipchai @Pixabay

All of the Boards that we work with are keen to try and do the right thing as we start to come out of lockdown and these are some of the discussions we have been having in recent days:

  • The majority of the businesses we work with have, to date, been topping up pay to the full salary amount, even though government rules support only 80% of salary up to a maximum of £2,500 per month, and broadly hope to do this for as long as the furlough scheme continues. In many cases, senior directors and business owners are taking pay cuts in order to support the payment of the shortfall. This is done because they believe it is the right thing to do, but also because it is hoped to foster staff loyalty as people come back to work. Sadly, all of the companies we work with are contemplating greater or lesser levels of redundancies as the furlough scheme winds out, but want to keep staff on the scheme for as long as possible to give them the best cushion that they can.
  • Contract waivers. Customer contracts are difficult areas for many companies. Many businesses have regular monthly contracts in place for the goods or services they deliver and the questions arises as to whether or not they should enforce those contracts if the goods and services either cannot be delivered because of lockdown rules or simply the customer is too busy fighting their own fires to benefit from the service during the lockdown period. All of the companies that we work with that have these types of arrangements in place have simply waived the contract payments rather than trying to enforce them as contractually they would have been able to do. Some are seeking to extend the contracts to make up for this, but this is not universal. In all cases, they have done this because it is the right thing to do and the hope is that in most cases this will be reflected in customer loyalty as life goes back to normal.
  •  It is surprising how well employees have adapted to working from home, in cases where they are able to. The technology for remote networks and video conference calling has worked better than anybody had reasonably expected and many staff are happy to be saved the strain, time and expense of commuting. Many companies are thinking hard about releasing some of their office space and saving significant costs. Clearly, this is the right way to go, but sensible companies are thinking more deeply on this subject in a number of ways. The first thing to do is to think about the position of the employee and what working from home might mean to them. If they live alone, will they suffer from isolation? If not, do they have somewhere where they can work without interruption? How do they manage childcare issues?
  • From the company point of view, the issues are rather different. In most companies the idea of control and clocking on and off are irrelevant as managers know when their staff are working effectively and are mostly happy to let them be flexible with the times that they deliver their labour. Much more difficult are the issues around staff engagement and commitment, team loyalty and the indefinable sparking of ideas which happens so much better around a water cooler than on a Zoom call. All of these matters are big issues and companies are spending time now on thinking these matters through.
  • Financial responsibility. It is a sad fact that as we come out of lockdown and wean ourselves off the furlough scheme, many companies are going to find an increasing struggle with cashflow. It will become increasingly important for directors to consider the issues arising under the Wrongful Trading legislation. Under the Insolvency Act, directors can be guilty if companies continue trading beyond the point when directors reasonably believe that the company will be able to avoid a loss to creditors. The furlough scheme has meant that many companies were able to avoid cessation of trading because of the early introduction of the furlough scheme and now increasing numbers of companies are benefitting from the government backed loans that are coming through. However, directors are now facing greater uncertainties because nobody knows how their business might develop over the next few months and years. Therefore, directors will have to consider carefully their Wrongful Trading position in respect of both customers and suppliers. New draft legislation has just been presented to Parliament, which will change and update the law hopefully to reflect the current situation, but as yet it has been too early to digest the detail of it.


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