How small businesses can mitigate the threat of coronavirus

Insurance cover, sick pay and cash flow will be at the forefront of the small business fraternity's minds as Covid-19 rages on

With the Government warning that more than six million people could end up off work when coronavirus peaks, small businesses are at particular risk from the economic fallout. 

What do firms need to know to prepare for the worst?

Insurance

Although Government has said it will declare coronavirus a “notifiable disease” – a classification required by many insurance policies – the Association of British Insurers has said that most business insurance policies are still “unlikely” to cover losses.

Advice from the Federation of Small Businesses (FSB) is to check the wording, as standard policies may not include any protection if the business suffers due to an outbreak of disease.

They advise checking to see whether Business Interruption cover is included in the commercial insurance policy. This covers lost income after a disaster, and often comes up when discussing terrorism cover. 

If Business Interruption cover is in the policy, then an extension for “notifiable diseases” should also be included. Insurers can add it but they are within their rights to refuse, or to ask for an increased premium.

The Association of British Insurers says the Government's decision to declare the coronavirus a “notifiable disease” is unlikely to apply retrospectively, and also urges holders to check the small print of their policies.

"Standard business insurance policies are designed and priced to cover standard risks, not those that are very unlikely, such as the effects of Covid-19," a spokesman says.

Sick pay 

FSB advice is that employees who develop symptoms will be unfit for work and entitled to Statutory Sick Pay (SSP), subject to meeting the qualifying criteria. 

However, ACAS guidance on coronavirus states that there is no statutory right to pay if someone is not sick but cannot work because they have been told by a medical expert to self-isolate, or go into quarantine.

Nonetheless it is still good practice for the employer to treat it as sick leave and follow their usual sick pay policy, or for the time to be taken as holiday.

Clearly if employees have been told to self-isolate on medical advice because it is known or reasonably suspected they have been exposed to the virus, rather than just as a precautionary measure, they would be entitled to SSP. This was confirmed by Boris Johnson in parliament earlier this week.

If, as an employer, a company choses to go further than public health advice and ask a symptomless employee who has returned from a category two area to stay away from work, then it will need to pay them their normal salary for this absence. 

Similarly, if a symptomless employee chooses not to attend work as a precautionary measure, they would probably not be entitled to SSP. 

Some employees may be anxious about the risks of being exposed to the virus due to travelling on public transport to attend the workplace, and could refuse to work on this basis.

In this instance, unless there is clear evidence that the employee’s concerns are not genuinely held, the best approach would be to assuage employees’ anxieties by referring them to published advice from public health bodies and making it clear that the risk of catching coronavirus at work is low.

Employers may choose to be cautious about permitting those employees to work from home or otherwise stay away from the workplace because they do not wish to set a precedent.

Cash flow

Companies have thus far been offered limited help from the Government to mitigate against cash-flow problems but Boris Johnson has said the Department of Business, Energy and Industrial Strategy (BEIS) would be on hand to support companies. The limited help on offer to businesses facing slumping sales or a shortage of workers is laid out in the Government’s Coronavirus action plan. 

"For businesses facing short-term cash-flow issues (for example, as the result of subdued demand), an effective mitigation already exists in HMRC's Time To Pay system. This is offered on a case-by-case basis if a firm or individual contacts HMRC about falling behind on their tax," the document says. This scheme lets companies pay the previous year's tax bill in instalments over time rather than in one go.

Mark Carney, the Governor of the Bank of England, has said it is crucial to support businesses hit by the virus to ensure that short-term difficulties do not become a long-term drag on the economy.

"What we want to avoid is a permanent impact on the capacity of this economy – we don't want viable businesses to go out of business because of the very necessary steps that need to be taken to protect the British public," he told MPs.

That means providing temporary support to small businesses that run into trouble with their cash flow.

As such, UK banks are also rolling out emergency loans to businesses that are showing signs of financial strain due to the outbreak. Barclays, Santander and Royal Bank of Scotland have contacted thousands of business customers in recent days to ask if the outbreak was putting their cash flow at risk. 

Barclays, for example, has signed off its first batch of overdrafts and short-term loans designed to ease the financial strain. 

On cash flow risks, FSB national chairman Mike Cherry says: “The sooner you can identify potential pinchpoints, the sooner you can put risk controls or alternative plans in place.

“Invoice insurance is a helpful way to hedge against supply chain disruption and potential non-payment. Equally alternative finance options – like invoice or asset finance – can serve as useful ways to shore up cash flow.   

“If the impact escalates, we’ll be looking to government and banks to pull out all the stops to help small firms. It’s been encouraging to hear the Bank of England discuss targeted interventions for small businesses.

"The Government should also look at possible measures to support the self-employed such as a dedicated hardship fund for those who fall ill or have contracts cancelled.”

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