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The Coronavirus Act: Where it Falls Short

As the UK government works to patch the holes in hastily drawn up crisis legislation, Professor Dagmar Schiek from Queen’s School of Law says there is a renewed case for an adequate welfare state.

The UK government’s decision to plough £12billion into a support package to help businesses and households weather the economic storm caused by the COVID-19 pandemic includes £7billion for workers and firms. However, the new legislation is problematic as it does not extend to the newly self-employed, those in the gig economy or those on zero hours contracts, says Professor Dagmar Schiek, an employment law specialist from Queen’s School of Law.

“If your employer has had to close down as a result of the COVID-19 crisis, then you can be furloughed, meaning the government will pay 80% of your earnings,” explains Professor Schiek. “However, this legislation only applies to employees who are covered by PAYE. That means, for example, that some atypical workers, such as casual employees, are not paid by that. They can only access Universal Credit, whereas employees are eligible for 80% of their salaries, capped at £2,500 a month,” says Professor Schiek. “There are also problems for those who have not been with their current employer by the end of February, as they are not covered by the scheme.”

Bailing on the self-employed

While The Coronavirus Self-employment Income Support Scheme offers grants for the self-employed (worth 80% of their profits for three months), they will have to wait until June for their first payments.  “There is a scheme that self-employed people can apply [for support] on the basis of the last three years tax returns up to £2,500 a month,” says Professor Schiek. “But they have to keep going somehow until June.”

This scheme also excludes certain groups, including start-ups and gig workers. “With every step, [the government] notice the problems of not having a proper welfare state. They are just going on patching the leaks where they occur because they don’t have a choice,” explains Professor Schiek.

“People who have recently changed from employed to self-employed or who have come out of a period of unemployment, they are now really short-changed and I hope the government will consider them because these are the most vulnerable,” says Professor Scheik. “These are businesses just starting up.”

She adds, “The self-employed, who are not covered, have an incentive to continue working and that isn’t always safe. I think the government needs to take away those incentives by proper welfare provision. It’s also in the interests of the regional economy. If no one has money, they can’t spend it and things are going to be even worse than they are already. There is an economic impact of COVID-19 but proper welfare state entitlement can dampen that impact a little,” she adds.

Inadequate sick pay

Statutory sick pay is available for workers who are self-isolating as a result of coronavirus, however, Professor Schiek says the UK’s sick pay rate, at £95.85 a week, is not enough for people to live on.

“If you have symptoms or you have to self-isolate, normally in this case, you are covered by statutory sick pay. Now statutory sick pay is £95.85 a week, which is considerably lower than most pay. If you are sent home because your workplace has to close down, then you get 80% of your salary,” says Professor Schiek.

Professor Schiek argues that gives rise to a public health issue. “That is a perverse incentive for employees not to self-isolate,” says Professor Schiek.

By comparison, the sick pay rate in the Republic of Ireland of £266 per week, while in Germany and Austria, most employees are entitled to continued pay for an initial period of sick leave, after which sick pay is 75 % of your earnings. The UK is very low by comparison and it is very difficult to live on that, especially in this situation when the kids are at home and you need to do more than you normally do,” she says.

Welfare shortfall

A decade of cuts to health and social care mean the welfare state is ill-equipped to deal with a crisis of this magnitude, says Professor Schiek. She believes the government should increase the UK’s statutory sick pay rates, at least for the period of the crisis.

“There are a lot of difficult dynamics going on and the government has already reacted to some of the issues. I think they will have to think about a proper welfare state in the case of sick pay also, including all those casual workers who have a real incentive to go on working or to find other casual work,” says Professor Schiek.

“That requires more investment. Northern Ireland could not do this by themselves. Under the statutory rules, they need to replace the sick pay for at least smaller employers. There is an incentive to race back to work. I’m not saying people are irresponsible and will do that, but there is an incentive to do that.

“The lack of welfare state is coming to the fore. Many European countries already have layoff regulations in place. Those countries pay for temporary layoffs in crisis and that is supported by social insurance. That is the case in Spain but also in Germany. That social insurance is paid for on a long-term basis by contributions from employers and employees, so it is much less strain on the public budget.

“I think the public budget in those countries still has to complement those systems because of COVID-19, but in principal they are there. Those countries are much better equipped,” says Professor Schiek.

Onus on employer

If you employer is on the list of essential services and is not closing down, the onus is on the employer to ensure health and safety of workers. Professor Schiek says there was a lack of clarity over what that entails. Last month, for example, workers from a Northern Ireland meat factory walked out over inadequate social distancing measures.

“This strike went ahead because, although it is an essential service, the employees didn’t feel the employer was complying with health and safety. That employer should have reduced those shifts by half to give the employees more space so that they could comply with health and safety.

She adds, “They need to come up with more specific health and safety obligations regarding what employers need to do to organise their workplaces safely. They are under an obligation to organise the workplace in such a way that if people have the virus, and they don’t know they have it, that other people aren’t infected, and that employees don’t infect each other. I think there is more room for improving the regulations.”

School of Law