The current and future challenges of Covid-19 for employers and their benefit programmes.

Only a few weeks ago most of us were looking forward to, and planning our summer holidays, and the thought of a lock-down as a result of the pandemic was far from our minds. Not only have we had to adjust to the new normal of a lock-down and home working, for us in the North East this has been combined with the backdrop of a falling Oil Price and reduced energy requirements, all taken together, creates a ‘perfect storm’ for the North East economy, businesses and their employees.

All of this is then overlaid with new initiatives and concepts launched by the Government to ease the impacts of what we are all facing, and furlough has now entered our daily vocabulary. Previously it was a foreign or typically an American concept, deployed and heard about on the evening news when the American Government Budget discussions fail and result in shutdowns, it’s all new and it’s a lot to take in and manage, but decisive informed action is required by business.

Whilst the impacts of Covid-19 has tangible immediate impacts, it is becoming apparent that there will be significant long-term consequences, and we are finding many business owners have not had time to review how these will impact and what action is needed now to mitigate. Focussed, informed, bespoke advice has never been more important or valuable.

The Government has launched a range of economic stimuli to support businesses and employees alike, and the ability to Furlough staff and have 80% of their salary paid by the Government to a maximum of £2,500pm (plus minimum employers pension contributions and employers national insurance) assists businesses to retain key skilled workers whilst focussing on ensuring there is a business to return to work to, and offers critical financial support to employees.

At face value, it’s a straightforward scheme.

However, we have a history of pension legislation in the UK, and compliance with previous Pension Acts has not been removed, although there are certain specific qualified easements. Understanding how furloughed employees interact with Automatic Enrolment, or what your options are when you offer a higher than statutory minimum contribution pension scheme, and what consultation is now required for employees wanting to effect changes all need to be addressed. And whilst the first focus will be the technical or legislative impacts, there are very real practical implications in how these decisions can be implemented and how it interacts with payroll, what payroll changes and reporting is required and even how you manage pension uploads. And that’s just your pension.

Another consideration is what are your staff insured for when on furlough? Are there death benefits maintained and at what level? How many Covid-19 claims can you have and over what period, before your limits run out?

Private Medical Insurance, for example, are you currently paying for a benefit staff can’t use as Private hospitals are now working for the NHS? Then there are the p11D tax implications for staff and the complication of staff payroll deductions to cover dependants benefits. All of these can impact on your flex scheme – some providers such as Gym memberships are looking at extending the scheme year. That will mean your flex benefits may no longer align with your flex windows.

Next, investment markets have been volatile and seen significant losses. Employees may not be focussing on this at this challenging time, but it will become front and centre when staff start questioning whether the scheme default selected by the employer has performed as expected and what oversight has the employer had on this key benefit?

If all of that wasn’t enough, there’s the dark shadow of future increased costs – we can but see a hardening of rates over the next few years, and that inevitably brings us back to budgets and value for money.

So, what can be done now? Now is the time not to take decisions without understanding the mid to long term impacts, what your strategic objectives are and how your employees will be impacted. Invest time with an adviser in understanding what all these issues mean for your business and your Employee Benefits programme.

It’s so important to continue to develop your strategy to ensure that decisions taken now, don’t hamstring the business going forward, or dis-engage your employees – a fully engaged workforce is going to be needed by everyone to help weather the future rough waters.

Lastly review and implement, then start the process again – it’s a fast-moving landscape and you need to be aware of developments which can currently be week by week, if not day by day.

We are in many ways in ‘uncharted waters’ so it is likely any strategy enacted will require careful and frequent monitoring to continue to navigate the continually changing landscape.

Anne Lawson is an Employee Benefits Consultant at Acumen Employee Benefits and can be contacted on or 01224 001946.