Rebooting Ireland

The past month has seen the reopening of the retail and a significant segment of the hospitality sectors. But many doors remain closed on streets and in shopping malls throughout the country. This is partly due to difficulties in adhering to physical distancing and other health and safety requirements imposed as a result of the Covid-19 pandemic – but much of it is the result of the damage suffered as a result of the lockdown.

In its submission to the Department of Finance on suggested measures to reboot the Irish economy and promote economic recovery and employment, KPMG noted that businesses had been carrying significant fixed costs during the lockdown but with little or no revenue streams.

The submission went on to point out that as the economy gradually re-opens, they also have an additional cost burden to ensure they are Covid-19-compliant, such as personal protective equipment (PPE), more intense cleaning costs and new fixtures and fittings to deal with social distancing. Reduced capacity will also be a key factor affecting the ability of many businesses to generate revenues, it added.

The road to recovery will be a long one, according to Dublin Chamber head of communications Graeme McQueen. “Covid-19 has had a massive impact on how many businesses operate,” he says. “The road to recovery will be a long one for the business community and our commitment in Dublin Chamber is to help firms with the challenges that lie ahead and to assist them in making the changes that will be required.”

He believes society will have to live with Covid-19 for a long time to come. “This will obviously have major ramifications for the business sector,” McQueen adds. “As the economy re-opens, we expect to see risk tolerance levels increase. Much will depend on the level of social distancing that is required in public. Ultimately, businesses will continue to do what is required in terms of conforming to expert health advice and providing an environment that provides staff and customers with confidence.”

Childcare situation

And getting staff back to work will be tough for some firms, certainly until the childcare situation is resolved. “Our most recent survey of members identified that the return of workers to workplaces will be very gradual over the coming months. Around three in five firms say that they expect to have less than 50 per cent of staff back in the office by August 10th.”

A phased return may well be appropriate where employees have been on temporary lay-off or home working, according to Ciara Ruane of law firm Pinsent Masons. "This may be appropriate because it is necessary to reduce the numbers of people at the workplace to facilitate social distancing, or because the workload is likely to ramp up over time rather than immediately returning to pre-pandemic levels."

I believe that when we look back on this period, we'll see that the Covid-19 crisis was the catalyst for many companies to make many positive changes

This will require careful selection and, of course, any selection exercise must be fair. “As part of this, employers will also need to consider how they will deal with vulnerable workers, taking account of the risk of age and disability discrimination and, in particular, the duty to make reasonable accommodations,” she adds. “They will also need to consider how they will deal with those with caring responsibilities, taking account of any possible sex discrimination issues.”

Employers may wish to use leave periods effectively to ensure a smooth return to capacity or as a way of staggering returns. But they will need to ensure that they comply with holiday provisions in the contract or in the Organisation of Working Time Act, including any notice requirements, Ruane advises.

"Businesses requiring their employees to work from their usual workplaces will need to ensure that they have conducted appropriate health and safety risk assessments to identify and manage risks appropriately," says Paul Gillen, also of the Pinsent Masons employment team. "A novel approach being used by many employers is for their health and safety officer to take a short video of their office or site exhibiting the safety protocols that have been put in place to safeguard their employees. The employer can then send it to their employees, that way they can be reassured adequate precautions have been taken to ensure their safety on their return."

Risk presented by employees

And there is the risk presented by employees themselves. “Employers may be considering more invasive health monitoring – such as enforced temperature checking and health questionnaires – as part of their health and safety risk assessment,” Ruane notes. “They may also be asking more detailed questions about those with underlying health conditions who are especially vulnerable and may need additional protection. Employers obtaining health information about third parties, such as family members, and sharing the identity of employees who have contracted the virus and who may have exposed others to risk will have to consider their data protection obligations. Employers will need to consider whether any new health monitoring practices are ‘reasonably necessary’ to comply with a legal obligation, such as health and safety duties.”

And these additional measures and changes to working patterns will all cost money. KPMG has proposed a package of measures to help pay for them including zero-rated VAT for certain affected businesses until the end of the year, a refund of tax paid in prior years for losses in 2020, a complete waiver of commercial rates for 2020, the reintroduction of the 9 per cent VAT rate for tourism, and incentives to encourage private capital investment in the recovery.

The aim is to give businesses the breathing space required to recover, according to KPMG managing partner Seamus Hand. "If unemployment levels are to be minimised and the economy is to have a chance to recover quickly, it is essential that businesses whose viability has been put at risk by their closure are given the lifeblood they need to survive the critical period ahead."

Ibec went further in its Reboot & Reimagine Campaign proposals. The employers group recommended a €15 billion reboot plan within the first 100 days of a new government and an increase of €25 billion in the lifetime of the National Development Plan, through a combination of exchequer, private and other finance.

While the Programme for Government (see panel) contains a commitment for a “July Stimulus” package and a Recovery Fund, no figures have been put on their potential scale. Interestingly, the Ibec proposal is not necessarily to spend the €15 billion but to have it in place as a form of financial firepower to support the businesses and areas of the economy that require it once the damage has been assessed.

Additional financial help

Small Firms Association director Sven Spollen-Behrens believes businesses will require additional financial help if they are to reopen successfully. "The cash grants for reopening are worth between €2,000 and €10,000 depending on last year's wage bill," he notes. "That will be gobbled up very quickly by the health and safety measures required by Government. What we are really looking for is help with the liquidity piece. Without that, you can forget about reopening for many businesses."

On a more positive note, Skillnet Ireland chief executive Paul Healy says finance isn't the only issue and training supports can help business owners to adjust to the post-Covid world. "Mentors Work is a Skillnet Ireland programme available to help companies through that process," he explains. "Gordon Lucey in Ballyvourney in west Cork availed of a Skillnet Ireland programme during the last crisis and that helped him set up the 9 White Beer Company. That was hit badly by the shutdown of pubs and the hospitality industry and he had to close the business. He subsequently availed of one of our mentoring programmes and has reopened and pivoted the business to manufacture hand sanitiser. He has been able to re-employ most of his team as a result."

Graeme McQueen also takes a positive view. “Businesses will continue to adjust as things evolve. If there’s one thing the Covid-19 episode has shown it is the resilience of the business community. Over the past few months, we’ve seen how businesses are able to pivot quickly to adjust to a changing environment. The legacy of Covid-19 will be huge. In the short to medium term, it is all about recovery and getting businesses back on their feet as quickly as possible. In time, the business community will bounce back.”

And some good could come out of the crisis. “I believe that when we look back on this period, we’ll see that the Covid-19 crisis was the catalyst for many companies to make many positive changes,” he adds. “Prior to Covid-19, firms were kicking the can down the road on things like working-from-home practices. The Chamber’s research has identified that nine out of 10 firms have had a positive experience of remote working, with around one third of companies who did not offer remote working previously stating they will implement policies in this area going forward.”

And there will be environmental and other benefits. “We’ll see changes in the behaviour of workers in the city,” says McQueen. “For example, we fully expect to see a long-term spike in the numbers of people walking and cycling in the city. Ultimately, this ability to adapt and change to a new normal bodes well for the business community’s response to the huge sustainability challenge that faces us.”

Making home working work

The home working genie is now well and truly out of the bottle. Work may never be the same again for some of us, who will either work from home permanently or part of the time as a result of the Covid-19 crisis.

In the US, Twitter has already said it may become standard practice for its employees while Facebook's Mark Zuckerberg has indicated it could become permanent for a sizeable chunk of his company's workforce. In the financial world, BlackRock and Morgan Stanley have informed markets they will require less office space in future due to changed working patterns.

Things were probably moving in the direction of increased working from home in any case due to climate change and other issues. Two-hour commutes can't be a good use of resources

In its Digital Pulse Coronavirus Flash Survey of more than 800 technology decision-makers carried out in March, 451 Research found that 38 per cent of people now working from home will not be going back to the office for the foreseeable future.

Last month, NUI Galway published the results of a national survey on Remote Working during Covid-19. Some 83 per cent of the 7,241 respondents said they would like to continue working remotely for at least part of the time but 28 per cent said their physical workspace at home was inadequate for the task.

One solution is to either convert space in homes or extend or invest in garden rooms. But who would pay for such outlays? Employer grants would be subject to income tax under present rules. KPMG partner Owen Lewis believes a scheme similar to the Bike-to-Work scheme might assist in this regard. This would effectively allow employees to write off these costs against tax while employers would be able to advance them the money in the form of an interest-free loan.

“Things were probably moving in the direction of increased working from home in any case due to climate change and other issues,” he says. “Two-hour commutes can’t be a good use of resources. If we are serious about building on the positives coming out of the often tragic Covid-19 situation, everyone including the Government has to play a role and things like the Bike-to-Work scheme should be on the table.”

Employers have a legal responsibility to ensure their home-based employees are working in a safe environment, however. Out of sight should not mean out of mind as employers will still need to consider legal and contractual obligations to employees, according to Paul Gillen of Pinsent Masons.

An employer has the same responsibility for the safety and health of employees who work from home as for those in an office

“Firstly, an employee’s contract must specify their place of work,” he explains. “If the contract doesn’t provide for working from home or contain the right to change the employee’s work location, any variation to their place of work will need to be agreed with the employee. Even if the contract contains the right to change the place of work, the employer must act reasonably when implementing the change. Gaining agreement of employees will be key and this will mean discussing how working from home will work and addressing any concerns the employee may have.”

And there are health and safety considerations. “An employer has the same responsibility for the safety and health of employees who work from home as for those in an office,” notes Ciara Ruane, also of Pinsent Masons. “Normally, an employer is required to carry out a risk assessment of the employee’s workstation in their home to ensure that it is suitable for work and if there are any hazards identified, measures should be put in place to reduce these.”

What’s in it for SMEs?

The Programme for Government, with its commitments to stimulus and a jobs-led recovery, has been broadly welcomed by the business community. While a little scant on specific figures, the broad range of measures contained within it is good news for SMEs struggling to recover from the impact of Covid-19.

Under the programme, a series of actions will be carried out to support the economy to return to capacity. Known as the July Stimulus, the main element within it is the Recovery Fund, a targeted stimulus to increase domestic demand and employment.

The Recovery Fund will be available for 2020, 2021 and 2022 and will comprise three different elements: infrastructure development; reskilling and retraining; and supporting investment.

Productive and labour-intensive capital investment projects focused on areas such as housing, retrofitting and public transport will be prioritised. Training and upskilling will be provided to help those who have been made unemployed by Covid-19 and are unable to return to their previous employment to enable them secure new opportunities.

In addition, measures will be put in place to help Irish companies access credit and capital. These may encompass credit guarantees and a role for State-backed lenders such as SBCI.

A key component of the July Stimulus will be the establishment of an SME and State Bodies Group to be chaired jointly by the Minister for Finance and the Minister for Business to coordinate the Government’s ongoing response to Covid-19 for SMEs.

Other measures of particular relevance to SMEs include legislation for the introduction of a new €2 billion Credit Guarantee Scheme, a SURE scheme and the warehousing of tax liabilities. There is also a commitment to review the Business Restart Grant and consider further grant supports for SMEs.

MicroFinance Ireland is to be scaled up so that it can support greater numbers of small businesses and start-ups in accessing finance. There will be a review to examine how European Investment Bank funding and other opportunities for external funding can be utilised to the maximum extent possible to support the recovery and the transition to a low carbon future.

Very welcome to SMEs is the commitment to set out how commercial rates will be treated for the remainder of 2020 and to create a code of conduct to govern relationships between landlords and tenants for commercial rents.

Clarity will also be given in relation to the future implementation of the Temporary Wage Subsidy Scheme and the future distribution of the Pandemic Unemployment Payment.

Sectoral taskforces, comprising of Government, independent experts and stakeholders and chaired by line ministers, will be established to focus on the specific needs of sectors and bring forward plans in the context of the National Economic Plan.

Finally, a high-level review of the Irish economy led by the Department of the Taoiseach will be undertaken to identify the sectors which have the greatest opportunity to grow and sustain quality employment in light of the continuing public health crisis, resulting geo-political trends, as well as the long-term challenges of the climate crisis, technological disruption and future public health challenges.