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Doing the right thing in the coronavirus crisis

The Charity Commission published COVID-19 guidance for the charity sectoron 19 March, which it has since been updating on an almost daily basis, as the impact of the virus and associated social distancing rules put an increasing strain on charities. The guidance is prefaced by an assurance that the Commission will take a “flexible and pragmatic approach” to regulation in the period, whilst urging trustees to remain conscious of the wider impact of their decisions.

In short, crisis or no crisis, it is incumbent on trustees to continue to take reasonable decisions in this most unreasonable of times.

Although Parliament is not in session, the Department of Culture, Media and Sport, which oversees charities, held an evidence session on 31 March on the impact of the coronavirus on the sector. The session highlighted some of the key challenges faced, with the disappearance overnight of huge percentages of income, but in many cases an increase in demand for services. The likely loss to the sector was calculated as being in region of £4.5bn.

Those giving evidence highlighted the need for action from DCMS, HM Treasury and the wider government, which will need to be supported by clear guidance and continued reassurance from the Commission in these unprecedented times.

At the time of writing, the Commission’s guidance focuses on:

CHANGING OBJECTS TO ASSIST WITH THE CRISIS. Many charities are considering how they can help the effort to tackle COVID-19 and its associated effects. Charities will need to consider their existing objects and whether the contemplated activities fall within scope. This may be by providing direct support to those in need, or indirect support, for example museums making their collections available online to help relieve isolation.

Reasonable change

If the existing objects are not wide enough, it may be possible to change them subject to ensuring such change is reasonable and doesn’t undermine the existing mission. Helpfully, where regulatory consent is required, the guidance confirms that the Commission will prioritise COVID-19 related urgent requests.

USING RESERVES AND RESTRICTED FUNDS. The Commission has confirmed that charities can, if necessary, use their reserves to survive in the current crisis. After all, what else are reserves for, if not a crisis like the one unfolding?

Trustees are also encouraged to consider their short, medium and longer term priorities, and to review projects to see what scope there is for reducing spend on non-essential activities.

Whilst it may be tempting to think that, in these extraordinary times, restrictions on the use of funds or assets can be ignored, this is not the case. However, there are options to be considered. For example, asking funders to relax existing restrictions, so that restricted programmatic funding can be used for core costs.

Permanent endowment

We have already seen several charities considering whether they can spend their permanent endowment. Although the ordinary rules governing permanent endowment still apply, one would hope that the Commission will apply the pragmatic approach indicated and, where regulatory consent is required, deal with requests to release restrictions swiftly.

CANCELLATION OR POSTPONEMENT OF AGMs AND OTHER KEY MEETINGS. Normally one would advise looking at your charity’s constitution to determine the answer to this. However, as the Commission notes, following the current rules on travel and groups, charities (as others) will have no choice but to cancel or rearrange face to face meetings pending a relaxation or suspension of the restrictions. The guidance makes it clear that such decisions are for trustees – not the Commission.

However, it is essential (as with all decisions at this time) to record both the decision and the reasons for making that decision (see the Commission’s guidance, It’s your decision). It will also be important to communicate with members, so that they know what is happening.

If cancelling or postponing your AGM has a knock-on effect on your ability to meet annual filing deadlines, the Commission asks that charities contact it for an extension.

USE OF VIDEO, TELECONFERENCING AND THE INTERNET IN PLACE OF FACE-TO-FACE MEETINGS. The Commission accepts that, even if you do not have power to hold virtual meetings in your governing document, being able to hold meetings remotely is going to be essential at present and trustees need to take a pragmatic approach to enable them to make the necessary decisions to manage their charity during the crisis.

Quorum impossible

There may be situations in the current circumstances, however, where boards are unable to form a quorum for a meeting, due to trustees being unwell or unable to participate remotely. Although this point is not mentioned in the guidance, it would be worth considering whether the decision can be ratified at a later date, once a quorum can be convened or via email consensus.

PAYING STAFF. The Commission has provided a link to the Government’s new Coronavirus Job Retention Scheme announced on 26 March. While the guidance around this scheme is still in development, it should be noted that the scheme is designed to help employers retain employees who will be needed when they begin to rebuild their business after the end of the pandemic. The aim is to reduce redundancies and lay-offs.

The scheme applies to employees who have been placed on ‘furlough leave.’ i.e. those who will remain on their employer’s payroll but are temporarily not working because of COVID-19.

Employee benefits

Charities will need to review the rules to determine what they can claim through the scheme, who is eligible, how to calculate claims, what happens to employee benefits while on furlough leave, and whether there are any other options they ought to consider in the circumstances.

SERIOUS INCIDENT REPORTING. Trustees are still required to report serious incidents, in accordance with the Commission’s serious incident reporting guidance, and to use their judgment in deciding whether an incident is significant in the context of their charity and should be reported to it. The Commission will continue to prioritise those incidents that place individuals at risk, or incidents that have had a significant impact on a charity’s operations and therefore serious harm to the charity’s work.

Continuing to report during this time may also assist the Commission to identify key issues across the sector and enable the Commission to adapt the guidance more quickly.

SAFEGUARDING. The guidance reminds charities of the importance of protecting and safeguarding their beneficiaries, volunteers and staff (and refers trustees to its safeguarding guidance). Obviously this is particularly important for those charities directly helping communities or vulnerable people who are self-isolating.

SIGNPOSTING. The guidance provides links to further resources, such as to advice issued by the Charities SORP on the financial reporting implications arising from the social distancing measures put in place to contain the impact of the COVID-19 virus. The advice (which is not obligatory) does not amend the Charities SORP but aims to assist in the preparation of accounts not yet filed.

Regulators’ guides

One would also highlight that other regulators are producing guidance, such as the Fundraising Regulator for fundraising questions, for charities in Scotland, OSCR, and for those in Northern Ireland, CCNI. There is also an ICO FAQs (although at the time of writing this is not specific to charities).

With mounting challenges on all fronts, it is to be hoped that the Commission continues to expand and refine its guidance, including developing the guidance as a centralised point of information for charities, and that it adopts the pragmatic approach in practice.

From the questions one is seeing, it is clear that further guidance or central signposting would be appreciated on a number of issues, including for charities in financial distress. Although the Government has announced certain changes to insolvency rules in an attempt to protect businesses during this period, such changes may only be a short term solution. It is important that trustees speak to professional advisers to protect the charity’s assets, as well as the trustees’ own position.

With such rapidly changing circumstances, restructuring professionals will be able to advise on maintaining liquidity, reducing overheads, changing management structures, managing payments with creditors (e.g. HMRC and landlords), discussions with lenders and investors and what government aid packages may be available. Needless to say, it is vital trustees ensure that their charity’s financial position and cash flow are being managed carefully.

While matters continue to develop at a rapid pace, it is worth keeping an eye out for further changes and additions to the Charity Commission’s guidance.

Keeping to the rules when initiating furlough leave

With so many measures being publicised in quick succession to tackle the effect of the coronavirus, it is difficult to believe that it was just a couple of weeks ago that the Government first announced the Coronavirus Job Retention Scheme to help employers cover salary costs.

While some might feel as though the concept of “furlough leave” has always been with us, given how much it has been talked about, charities are still looking for answers to key questions about how it will work in practice. Let us consider some of the most commonly asked questions based on what we know so far.

What is the Coronavirus Job Retention Scheme? The scheme has been devised to provide support for employers whose operations have, or will be, severely affected by coronavirus. The aim is to avoid, or limit the need for, redundancies by reimbursing up to 80% of salary for qualifying employees. The scheme will run until at least 31 May.

How will the scheme work? UK employers will be able to temporarily place workers on a leave of absence and claim back up to 80% of salary, subject to a cap of £2,500 per month, as well as associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

Online portal soon

Claims will be made through an online portal administered by HMRC. The portal is not available yet, but the Government hopes that it will be up and running by the end of this month. HMRC will pay the grant via BACS payment into the employer’s nominated UK bank account.

Can charities use the scheme? Yes, the scheme is open to all UK employers, including charities and other not-for-profit organisations, provided they had a PAYE payroll scheme on 28 February 2020 and have a UK bank account.

Guidance published by HMRC on 26 March says that employers who continue to receive public funding for staff costs during this period will be expected to use that money to pay staff, rather than putting them on furlough leave.

This could be relevant to some charities, although one suspects it is intended to cover organisations that are primarily funded by the Government and whose staff are either still required to provide essential public services or can be redeployed to assist with the coronavirus response.

Who can be placed on furlough leave? The scheme is open to all employees including full-time, part-time and casual staff. Although the guidance only talks about “employees”, it is likely that workers will also qualify. (It's hard to summarise the differences between workers and employees as each case will turn on its own facts and there are a number of factors that can be taken into account.) Self-employed contractors do not qualify for support under the scheme, but the Government has up a separate scheme for the self-employed.

No evidence needed

Business support guidance published by the Government suggests that the scheme is for employees who would otherwise have been laid off or made redundant, although there is no suggestion that employers will need to provide evidence of this to HMRC in order to qualify.

What about employees who have already been made redundant or who have been given notice of redundancy? In order to qualify for furlough, an employee must have been on PAYE payroll on 28 February 2020. Anyone hired since that date, or whose employment ended before that date, cannot be placed on furlough leave. If an employee was made redundant after 28 February, however, charities can rehire them and put them on furlough leave.

If an employee has been given notice of redundancy but is still employed, it is open to the charity to put them on furlough leave instead. If employers fail to consider furlough as an alternative to redundancy, they could risk claims that the dismissal was unfair.

What is covered by the grant? Charities can claim:

  • Up to 80% of basic salary, subject to a maximum of £2,500 per employee per month. Any fees, commission, or bonuses cannot be included in this calculation.
  • Enhanced (earnings related) contractual maternity, adoption, paternity or shared parental pay.
  • Additional sums for employer National Insurance contributions and minimum automatic enrolment employer pension contributions, based on the amount of grant received.

Charities will be responsible for calculating the amount of the grant and submitting claims to HMRC every three weeks. HMRC has published guidance on how to perform the salary calculation for different types of employees, including those with variable hours.

Do we have to make up the difference between the grant and full pay? Charities must pay the employee at least the amount received from HMRC under the scheme, but there is no requirement to top up their salary.

What about the National Living Wage (NLW) and National Minimum Wage (NMW)? NLW and NMW rules will not apply to employees on furlough leave because they will not be working. If employees are required to undertake training while on furlough leave, they must be paid NMW/NLW, even if that means the charity needs to top up the Government grant.

What if we can’t afford to continue paying salaries while we wait for the grant? The scheme will not be operational until the end of April at the earliest, although claims can be backdated to 1 March. If charities are unable to continue to pay salaries in the intervening period, it may be possible to get consent from employees to delay some or all of their salary until funds are received through the scheme.

How do we place someone on furlough leave? Unless there is a lay-off clause in the employee’s contract of employment, charities should get agreement to place someone on furlough leave. A minimum period of 7 days for consultation is advisable, although any variation to the employee’s contract will be effective from the date of their agreement to the change.

Duty to collectively consult

If charities intend to dismiss more than 20 employees who do not consent to being placed on furlough leave, the duty to collectively consult could be engaged. Charities should take advice if there is any question about whether collective consultation applies as penalties for failing to comply can be costly.

Employers must give employees written notice of furlough leave and keep a record of this. The notice should say how long the leave is expected to continue and employees must be furloughed for at least three weeks at a time.

How do we choose who to put on furlough leave? Employees cannot carry out any work while on furlough leave so it is not possible to share the burden by reducing everyone’s working hours and still claim reimbursements under the scheme.

Charities should make sure they use fair and objective criteria to select employees for furlough leave, following a similar approach as that used in a redundancy selection procedure. Guidance suggests it is open to employers to rotate furlough leave between employees in minimum 3-week blocks and this could be a way to limit claims of unfairness if some employees will be required to continue to work while their colleagues are placed on furlough leave.

What about employees who are already on sick leave, family leave or unpaid leave? Employees on sick leave or who are self-isolating in accordance with guidance published by Public Health England, NHS National Services Scotland, or Public Health Wales should receive Statutory Sick Pay. Once they are fit to return to work, they may then be placed on furlough leave.

Vulnerable employees who are shielding in line with Government guidance, who can be placed on furlough leave.

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020.

It appears that statutory maternity, paternity, adoption and shared parental leave payments will continue as normal. Enhanced (earnings related) contractual maternity, adoption, paternity or shared parental pay can be claimed back under the scheme.

What can employees do while on furlough leave? Employees will continue to be employed and will still be bound by the terms of their contract of employment during furlough, subject to any changes agreed with them.

Employees cannot do any work that provides services or generates revenue for their employer while on furlough leave – this includes work on reduced hours or reduced pay, or work on a voluntary basis for the employer.

Another job

There is nothing in the guidance that prohibits an employee from working in another job while on furlough leave, although the contract of employment will continue during the furlough period so any restrictions on working elsewhere will apply. Employees can volunteer for another organisation while on furlough leave.

What is the effect of furlough leave on holiday entitlement? Workers will continue to accrue annual leave whilst they are furloughed, and an amendment to the Working Time Regulations 1998 means that employees will be able to carry forward up to 4 weeks’ paid holiday over a 2-year period if they can’t take their holiday due to coronavirus.

Charity marketing in a time of crisis

The NVCO predicts a catastrophic long term hit to the charity sector from COVID-19. Given the cancellation of traditional fundraising events and closure of physical stores, the sector may see a shortfall in income of £4 billion – triggering a devastating and long lasting impact on the future of the charity sector in the UK. While emergency fundraising appeals have launched and grants made available, these are still only likely to cover a fraction of the income lost.

Charities are naturally focused on two things right now: organisational survival and delivering their services in unprecedented circumstances. In this context, should marketing even be on the agenda at board meetings?

The answer is yes.

Charities are brands. They may be led by purpose rather than profit, but the rules remain the same: they need income to deliver their services, and this relies on being relevant and visible to donors and supporters. The big challenge of today is how to be relevant and visible when all your traditional tactics no longer make sense. It requires new thinking and new approaches for both now and the future.

Managing the new now

The global crisis came fast and came in force - and there was no playbook for dealing with it. Despite this, some charities responded incredibly quickly. Shelter rapidly evolved both its service support and fundraising messaging. Housing concerns were answered though a wide-reaching TV campaign and an updated online presence. Those fortunate enough to have homes (albeit confined to them) were encouraged to donate.

The lockdown is of course closely linked to Shelter’s purpose; it makes complete sense to the public that the charity is highly visible. Likewise, Alzheimer’s Society and Age UK - given the sharpened focus on care for the elderly and vulnerable - have also been able to quickly launch fresh appeals which don’t carry concerns of attempting to capitalise on the situation.

Other charities, especially those outside the health or medical and social care spheres have had to find other ways to respond. For example, museums are opening up their collections online, using the hashtag #MuseumsFromHome, and conducting more entertaining social campaigns to keep home-bound audiences engaged.

The Getty Museum of Art is encouraging people to recreate famous artworks from their homes. Similarly, theatres are streaming free shows - like the National Theatre, making content available every week. These cultural charities, which typically rely on physical visitors, have taken art into people’s homes instead – and helped build new audiences in the process.

Non-cultural charities are also using the lockdown as a way to provide entertainment – and use this as a platform to promote their services. CALM (Campaign Against Living Miserably) is running “Friday Night Lock-Ins” on Instagram with live performances from musicians. Fitness charities are also having to rethink their role, with some great initiatives. Paths for All provides tips for those that can’t leave their home, but still need to keep moving. Better, the charitable social enterprise, is providing free virtual classes through its mobile app.

Pet shelters, while having to close to the public, have updated their sites and feeds with insights and tips for looking after animals and how to keep them entertained while at home. The Wildlife Trusts has turned to digital as a means to help families at home during lockdown, quickly activating a series of videos to help both to educate and entertain children on the nation’s wildlife.

Everything is digital

All these projects rely on being able to respond quickly to the new circumstances, understanding what people need right now, and being smart on what role you can play. They all also rely on having digital skills and experience: everything right now is digital.

For many, this has had to go beyond making some changes to the website and updating social media profiles. Many charities are having to work out quickly how to deliver core services through digital channels. The COVID lockdown has accelerated the digital journeys that many charities have been undertaking for some time. It has meant that plans and strategies which may have been in place for further down the road have been more quickly implemented, and that digital teams are rapidly learning to be more agile. This shift to digital is critical in providing the all-important visibility and relevance.

Planning for a new future

Every organisation, whether commercial, public or charity, is having to tear up its strategic plans and rethink its role in people’s lives. Even after the initial health crisis is over, we are going to see a long period of financial instability. Funding from government and trusts will change. And the public will have new priorities on what matters to them. We will all be thinking differently.

Perversely, it’s in this new context where we will need charities most – and why it’s so important that charities plan now for this new future. Many in the wider marketing sphere have already started to use the current time (if teams are not furloughed for the duration) to assess their digital architecture and longer term marketing strategies, and to simply run an intensive Marketing MOT on current work. Channel strategies, budget allocation, messaging and creative approaches, and data capabilities are all being reviewed against the new reality.

When the lockdown lifts, it will be the charities which understand new human behaviours (their employees, volunteers and supporters) which will be best placed to grow again. Many charities rely on a few big bang, high profile events like the London Marathon. With these all cancelled, now might be time to plan a more data-led, personalised, always-on approach to fundraising – and be testing this approach out over the coming months. Some charities will also rightly be questioning whether they have enough technical and digital knowledge in their delivery, management and trustee teams.

And with marketing budgets likely to be reduced, it is also the time to look for efficiencies in media and marketing spend. Investing time now in assessing any possible wastage in ad spend, to make sure keywords are working as hard as possible, and to ramp up appropriate and refreshed content is all going to prove vital.

No one knows how the next 1-2 years may turn out. But those charities which start to think and plan now are going to be best prepared for whatever does come our way.

Key charity issues during coronavirus

Understandably, many charities are very concerned about a number of issues during this unprecedented time. However, as a priority, trustees should consider what their short, medium and longer term priorities are and amend their plan accordingly.

Here are answers to some of the most frequently asked questions from charities:

Can a charity’s reserves and restricted funds be utilised to help get through the coronavirus crisis? Reserves can be spent to help cope with unexpected events like those unfolding at present. Trustees should identify which funds and assets have limits on their use. If they are found to be internal only and your charity has ring-fenced certain funds for a particular purpose, then you may be able to reprioritise these.

Restricted funds

However, if they are restricted funds – meaning they cannot be spent at trustee discretion – then they can only be used for a specific, defined purpose. For example, if you have a permanent endowment, there may be restrictions on selling it to release funds.

In some instances, there may be ways to amend these restrictions, but accessing or releasing restricted funds should only be considered if there are no other options.

Can a charity cancel or postpone its AGM or other key meetings? Given the current Government guidelines around social distancing and non-essential travel, it may be necessary to cancel or postpone your AGM and other critical meetings. If this decision is taken, then it’s vital that it is recorded to demonstrate good governance of the charity. This is particularly important if a meeting was due to discuss annual reports and accounts.

Wherever possible, try to get your Annual Reports to the Charity Commission on time. As a result, it is worth considering an alternative way of meeting, which brings me on to the next frequently asked question.

Can a charity use video or teleconferencing in place of face-to-face meetings? Some charities have clauses in their governing documents that allow virtual meetings or the use of telephone facilities. Therefore, I’d recommend that trustees check these documents and see if amendments can be made to enable digital meetings.

Record decisions

Even if there is no such clause in the governing documents, in such unprecedented times the Charity Commission is likely to be flexible as to what is reasonably practicable in the circumstances but be sure to record the decision to demonstrate good governance.

How do I get support to pay my charity staff? Many charities will be concerned about their staff in what are unprecedented times. However, the Government has announced that all employers – small, large, charitable or non-profit – will get support to help them pay wages.

The Coronavirus Job Retention Scheme has been designed to help any UK organisation with employees. To access the scheme, you must designate affected employees as “furloughed”.

Furloughed employees will remain on the payroll during this time but to be eligible, they must have been on the payroll since 28 February 2020 and on any contract – from full time to flexible or zero hours contracts. When on furlough, an employee must not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.

Wage costs

You will then need to make a claim for wage costs through this scheme, however fees, commissions and bonuses should not be included unless contractual. The grant from HMRC will cover 80% of an employee’s regular wage or £2,500 per month (whichever is lower) plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages. It’s then your decision whether to top up the remaining 20%.

Again, if the decision to furlough staff is taken, then it’s vital to record it in order to demonstrate good governance of the charity. A record of the temporary variation to each affected employee’s terms should also be retained for five years.

How hard can you expect staff to work at home? For home working to be successful, your staff must have a suitable place to work where domestic and family commitments do not, as far as possible, intrude into working time.

Home arrangements

Whilst employers usually steer clear of asking questions about home arrangements, it is reasonable to assume that an employee may not simultaneously work and care for a young child, elderly or disabled relative. If you don’t know whether your employee has caring commitments, don’t be afraid to ask them. You just need to ensure that you ask the same questions to all staff to avoid accusations of discrimination.

How can you ensure staff are not taking advantage of the situation? You may be concerned that employees working from home for the first time will not put in the same effort as when they are in their usual workplace. You will be reliant to a large degree on trust and may fear that some workers will not pull their weight.

However, you will likely already know which members of your staff are self-motivated, and which are going to see the requirement to work at home as an excuse to do less. This is where managers keeping in touch with staff should help.

Homeworkers should be appraised like any other workers. Some thought should be given to how you the charity employer can measure the quality and quantity of the homeworking employee’s output.

Special skills

I would suggest that the manager may need to engage in a little more micro-management than usual: setting regular specific projects or targeted tasks with specified deadlines, building in sufficient opportunity for reviews of work progress, and expectations in performance so any difficulties that arise can be addressed swiftly.

If it transpires that an employee is not pulling their weight and is taking the opportunity of working from home to avoid undertaking their work responsibilities, there is no reason why formal or informal disciplinary or capability action should not be implemented.

As long as the correct procedures are followed, such action will be justified. It may be necessary to adopt a slightly different procedure (with the agreement of the employee) e.g. undertaking investigation meetings by video conference rather than face to face meeting, or even by written representations only if, for example, the employee does not have the technology to undertake video conferencing.

What should be reported to the Charity Commission? It is ultimately still the responsibility of the trustee to report serious incidents using Commission guidelines. Using their judgment and common sense the trustees should, as always, decide if an incident is significant within the context of their charity and whether it should be reported to the Commission.

Fluid situation

The situation remains very fluid and subject to change with new guidance and support consistently introduced and updated. The key takeaway is to ensure that each decision taken is properly recorded to ensure good governance.

The Charity Commission has made it clear that its approach to regulation during this uncertain period will be as flexible and pragmatic as possible. However, although it is an unprecedented time, trustees must continue to be aware of and think about the wider impact of their decisions on the charity in the long run.