Andrew: Thank you, everyone. Obviously, it is still difficult times as we are going through this current crisis and certainly our thoughts and prayers going out to everyone who is suffering during this period. However, we are seeing some hopeful signs as cases and deaths do decline in most countries as we speak.
Certainly, countries are starting to open up again, that has been very helpful signs the Asian countries – South Korea, Singapore have opened up and they have been successful in that, at least been able to control any hotspots that are broken out. And now we are seeing Germany starting to open up its borders, children going back to school, shops are being opened. There is a general feeling that in Eastern Europe that they want to get back to normal and have all the borders open by June 15 and have people deal with another part of this crisis, which is not as spoken as much about, which is the mental health of people and needing summer vacations and needing to be able to get out into the pressure and enjoy things.
So, this is our second series. It is about the things have happened in Europe. Europe has been ahead of both the US and South America in terms of the epidemic and how it has affected everyone and as we are saying it is starting to open up, but the schemes are getting more defined and more firmly in place in terms of how they are supporting their workforce and how they are planning to get back to work. And we are going to discuss more about what is happening down in Latin America and Central America as we move forward.
So, we bring our expert Kym first to talk about what is happening in terms of the European countries. Over to you Kym.
Kym: Thank you, Andrew.
So, since we last did the webinar, a lot of the details around the schemes that governments have put in place in order to support businesses are much more well published. So, to focus first on Germany, now Germany has a system which has actually been in place since the previous recession back in 2008, is commonly abbreviated to the C.O.G. But what this scheme does is it allow employers with the agreement of the employees to reduce their working hours and to apply and receive funds back from the government. It is not quite as straightforward as just going. Yes, we will reduce it, there are different percentages and they are paid based on the employee’s personal situation. So when you are filing for this, and if you were to do so, you actually have to have quite a lot of information in front of you, so that you can justify that why you are looking at that short-term work. That one does need input from lawyers in order to work through it, payroll companies in Germany are not able to just apply for it. So, if it is something that is being considered in Germany, then it will be something that we can support you with, via counsel, and working with you on payroll. Same sort of situation in France – France, as you may be aware, if you are doing business there is already very protective of employees. Now the French government has put the partial activity scheme in place.
Again, with this one, you need to demonstrate why you are having to reduce hours in order to apply for reimbursement. The caps on the French scheme are quite favourable. So, employees do not necessarily miss out. But again, with this one, it is an online application that you have to go through, we are able to help with that. It is just the amount of documentation that we would need you to provide to us in order to demonstrate why government assistance is needed due to economic downturn, and it does not just rely on we do not think we can make the sales you actually need to demonstrate with accounts to show that there is difficulty there. For the UK, we had an announcement yesterday in regards to the UK furlough scheme, so UK furlough scheme was put in place at the beginning of April and it allows employers to claim back up to 2500 pounds or 80% of salary. It also allows you to claim back pension contributions and employers Social Security.
That scheme has just been extended until the end of October, but there will be additional parameters around it. As a scheme this is one of the easiest schemes to apply for, you do not have to send accounts, you do not have to demonstrate a significant loss in downturn. The main parameter around it is do you do your PAYE so your employers and employees’ tax online via the government portal. It does not take that long to do it is just making sure that you have got the documentation in place because it does ask for bit of information in regard to social security.
The changes around how the percentage split is going to change, the details on that are going to be released at the end of May. The government in the UK are looking more to having it as a collaborative process as opposed to the government fully picking up the tab and that is the first European country who is basically turning around and saying this Quint – “We will provide support, we are the ones who have ordered the shutdown in some cases of business or stripped to trade but it is going to become a joint effort.” Two other schemes in case of in Western Europe – the Dutch scheme. The Dutch scheme is one of the most favourable schemes I have ever seen if you can qualify for it and it will pay up to 90% of wages and the cap is actually insanely high and it is almost 10,000 euros a month that it will reimburse. However, the Dutch finance scheme also requires a huge amount of paperwork to be submitted to it. It wants to compare what your turnover was in 2019 compared to what your turnover is in 2020.
It also relies on a lot of other information being provided to some having looked through these applications. I have seen employers who have gone, is this actually going to be even worst asking for this amount of paperwork to qualify, and the percentage amount is dictated by the Dutch government and the indications so far, all that based on everything, they will reimburse you up to 50% of salary. But, again, it is a measure that was not imposed previously, all of these schemes have been put in place quite quickly and are still being refined. The Spanish scheme is one that is slightly different and anyone who has employees in Spain will know that the Spanish system is quite brutal in some respects from termination and actually, the scheme has been put in place in Spain, which is the outtake is equally brutal to some extent.
Now, what this means is as an employer, you are able to work with your employees to reduce the salary. However, the main change to Spain as opposed to the other four countries that I mentioned is in this case, the employee will actually be paid by the state directly with all of the other schemes that money is paid to the employer who has to then put it through payroll. Now, from a limitation point of view that means that an employer has to ensure that they have the funds available to run payroll which depending on cash flow at this time can be slightly problematic.
But in Spain, once you are accepted for your ERTE application, then that money is paid directly to the employee and they essentially, well not totally but come off your books as it were because you are not responsible for their salary provided that application is made. You can do an ongoing application that details that, as all these schemes may well change going forward. But as of today’s, date, that is the main state of play as it were in regard to the government schemes that are imposed across Western Europe in order to support employers.
Andrew: Thank you, Kym.
I think it is important to note here that practically and operationally from a US company standpoint, all of these schemes do require application to the government and getting approval before you really understand whether you are in a position to get reimbursement. As Kym pointed out, some of them are more onerous than others in terms of their requirements, but we have had situations already in a new, we can certainly claim whether US companies will get discriminated against or not. But, operationally we have seen companies do all the paperwork, apply for the schemes and get rejected and adopt from a cash flow perspective, as Kym is pointing out the schemes are defined, then certainly if you are successful in getting the application, then there is some surety that you would get the money from the government eventually. But in terms of the timing, it does vary in terms of what the timeframes that have been promised to reimburse them, much like the US government has put their schemes in place for the small business loans and it was quite some time and coming. So, you do have to manage through this. It is by no means a short thing and certainly a qualifying for some of these schemes because we are so lucrative is hard to do and they are not going to be any rules if your company is in financial difficulties, in terms of being prompt to give you notification to help you out. That is the state of play as we understand it in Europe today.