Covid-19: A Note for Producers (Update 28 April 2020)

Posted: April 28, 2020

Covid-19 – A Note for Producers (Update 28 April 2020)

The Producers’ Alliance for Cinema and Television (Pact) are continuing to host weekly webinars addressing queries from their members relating to Covid-19 and its impact on the film and television industry. As a follow-up to our note posted on 15 April, we have set out below a number of updates arising from the most recent webinars.

On 17 April, Pact published the results of a survey of members which illustrates the impact of the shutdown in greater detail. It noted that members who responded to the survey have lost over £250m in cancelled or postponed productions already, an average of £2.6m per production company.

As a response to the Covid-19 crisis, Pact are currently offering free access to their services for eligible UK producers for a period of six months.

As before, if you have any queries regarding any of the points below or the impact of Covid-19 on the industry more generally, please get in touch.

Discussions with government / lobbying

  • R&D tax credit. Pact is continuing to push for further information from the Government regarding the possibility of extending the R&D tax credit scheme to the creative sector. The DCMS has now set up a working group to look at this, and Pact have reported that the idea is now receiving a positive response from Government.
  • Business Rates Relief. Pact continue to lobby to extend the Government’s Business Rate Relief support scheme beyond the retail, hospitality and leisure sectors but the Government are currently resistant.
  • Coronavirus Business Interruption Loan Scheme (CBILS). The Government’s loan scheme aimed at small and medium sized businesses has been live since 23 March. As noted elsewhere, there have been a number of difficulties associated with the scheme and as of just over a week ago loans had been made to only around 6,000 British businesses. Anecdotally, Pact have heard that not many of their members are keen to access the scheme as after the interest-free period the banks may seek to introduce commercial rates.
  • Insurance. Pact are discussing the possibility of the Government “plugging the gap” in the lack of cover resulting from the Covid-19 epidemic. However, given the scale of the crisis it is unlikely that the Government, as the “insurer of last resort”, will have the appetite to do so. Pact are trying to involve UK broadcasters in this discussion more generally, as this will impact on every aspect of the industry. It was noted that it is currently unclear the extent to which premiums may be inflated in response to the current crisis, and this may be dependent on the industry’s ability to put in place agreed health and safety protocols. Pact are looking to consult further with members regarding the current behaviour of insurers.
  • Enterprise Investment Scheme (EIS) / Creative Industry Tax Relief. Pact are in discussions with the Government as to whether the EIS scheme can be opened up to bring private sector capital into the market, rather than forcing producers into state-back banked loans. If this is taken up it is likely to be a short-term measure. Similarly, Pact are discussing whether any short-term changes can be made to the Government’s Creative Industry tax relief schemes.
  • Public health protocols. Pact noted that the tone of the Government’s message has now changed somewhat to begin focusing on recovery rather than short-term management of the crisis. One point of discussion involves putting in place public health and safety protocols which will enable film and television production to continue, although there are no further details as yet.

Discussions with broadcasters

  • Working group. Pact is bringing together a “recovery group” to feed into the government’s engagement with the screen industries, and is setting up a working group with all major UK broadcasters with the aim of articulating common issues to Government.
  • Overdue payments. There is concern among Pact’s members about businesses not being paid for programmes/work that has been completed and delivered. Pact want to ensure that broadcasters are facilitating and expediting payments.  On a recent webinar a poll was conducted to see how many members are currently experiencing difficulties with payment. The results showed that, although 52% of respondents were not waiting to receive payments, 25% were waiting for payments in excess of £100k. Pact are taking this point up with the broadcasters.
  • Health and safety protocols. Pact noted that some health and safety specialists have started issuing protocols and Pact are in the process of collating these. Pact will be talking to broadcasters about potentially putting UK industry guidelines in place.
  • Cashflowing productions. Pact are discussing the possibility of broadcasters taking on a greater share of financial risk in relation to productions, particularly given the potential reluctance of banks to lend in the wake of the crisis. Although this discussion is at an early stage (and is related to ongoing conversations regarding production insurance), Pact noted that Channel 4 have written to Barclays expressing their hope that the bank will continue to lend on the same terms as before.

Discussions with guilds / unions

  • Equity. As noted previously, Pact and Equity have discussed mechanisms to provide actors with increased payments during the shutdown period. Pact initially suggested a mechanism whereby producers advance to actors a percentage of future income (rather than making the first call payments under the terms of the Pact/Equity agreement). This proposal was originally rejected by Equity, who asked Pact to approach the broadcasters to ascertain whether they may be willing to bear the additional costs as overages. Although the BBC and Channel 4 said that they would look at covering these costs on a case by case basis, the general response was that the broadcasters would not be willing to do so. Equity have since responded with a proposal similar to that originally advanced by Pact, whereby the producers would commit to paying the second call payments under the Pact/Equity agreement in combination with a recoupable advance against the actor’s weekly engagement fee. As Pact have noted, the main issue with this proposal is ascertaining what will trigger the resumption of normal payments, as some productions may have to wait longer than others before they are able to resume. Discussions with Equity are ongoing.
  • Writers’ Guild of Great Britain (WGGB). Pact are currently in discussion with the WGGB as to whether certain timings under writer agreements can be extended during this period of uncertainty (e.g. option periods, delivery periods). Pact note that the WGGB are broadly supportive of this proposal and are considering a general acknowledgement that these periods of time should be extended automatically.

Updates to government guidance

  • Cut-off date. The Government have confirmed that the eligibility cut-off date for the Coronavirus Job Retention Scheme has been extended to 19 March 2020, which means that employers can claim for furloughed employees that were employed and on their payroll on or before 19 March. Clarification has been provided regarding what is meant by “on payroll”, and unfortunately this has been defined very strictly by HMRC: the employee must have been notified to HMRC through an RTI submission on or before 19 March. Pact noted that it is common to make RTI submissions along with the payroll at the end of the month, which means that individuals employed at the beginning of March may not be caught by the scheme if the relevant RTI submission was not made before 19 March.
  • Fixed-term contracts. Previously there was some confusion about fixed term contracts; specifically, whether an employee was eligible for furlough where a fixed-term contract has come to an end ‘naturally’ or where there was no prospect of continued work. This has now been clarified – employees on fixed term contracts are not excluded from the scheme just because their contract may have expired. Wording which referred to contracts that have ‘naturally’ come to an end has been taken out of the guidance.
  • An employee can be re-employed, furloughed and claimed for if their contract expired after 28 February and an RTI was notified to HMRC on or before 28 February 2020, or their contract expired after 19 March and an RTI was notified to HMRC on or before 19 March.
  • Public funds. It has been confirmed that grants under the Coronavirus Job Retention Scheme do not count as “access to public funds”. This has relevance where organisations are applying for public funds elsewhere.
  • Where employee pay varies. If an employee’s pay varies over the course of their employment, in order to work out the 80% to which they are entitled employers will  use the higher of an average of payments made over the tax year or the amount earned in the same month of the previous year and pay 80% of this average (more detail of how this is calculated including with reference to those who have not worked a full year is available here).

Job retention scheme / furloughing updates

  • Annual leave and holiday pay. The Government have confirmed that annual leave does continue to accrue during furlough; whilst furloughed, employees will accrue leave as per their employment contract. In terms of any contractual holiday allowance (beyond the statutory minimum), it may be possible for employers to ask employees to waive their contractual entitlement during furlough.
  • It has been confirmed that employers will be required to pay holiday pay on top of furlough pay, and pursuant to the Working Time Regulations they will need to make up the difference between the employee’s contracted rate and the furlough rate. Pact note that the holiday pay section of the guidance is currently under review.
  • Maternity pay. It is possible to furlough employees who are currently on maternity leave (see here).
  • Pensions. If an employer offers a salary sacrifice pension scheme, it may be more favourable to move to an auto-enrolment scheme during this time as this does allow the employer  to claim on top of the £2,500 per month furloughed salary cap. Normally an employee cannot move out of a salary sacrifice scheme unless there is a “life event”; HMRC have confirmed that the Covid-19 epidemic is such an event. As with any changes to employees’ contracts to avoid potential claims their prior consent should be obtained.
  • Dailies. Pact have been asked by members whether it is possible to extend the Job Retention Scheme to dailies, who have no future promise of work due to the way they are contracted. The advice that Pact has previously received from HMRC is that dailies are not in scope to be furloughed as there has to be a job for them to go back to after the furlough period. However, some unions and other bodies have said that they have been told the opposite by HMRC. Pact are currently seeking clarification. Pact note that, if the dailies meet the relevant criteria then in theory they can be furloughed (i.e. if their contract expired after 28 February and an RTI was notified to HMRC on or before 28 February; or their contract expired after 19 March and an RTI was notified to HMRC on or before 19 March).
  • Minimum furlough period. An employee needs to be furloughed for a minimum of 3 weeks. You can then dip and out of furlough once the 3-week minimum has been reached. After the 3-week minimum there is no minimum period that an employee needs to be back in work before being furloughed again.
  • Director’s obligations. If an employee’s work for a company involves fulfilling their statutory obligations as a director (e.g. filing accounts), then these obligations can be performed while on furlough. The employee cannot however undertake any work for the company beyond these statutory obligations while on furlough.
  • Other work while furloughed. It is possible to undertake other work while furloughed; this will depend on the nature of the original employment contract. If the contract is exclusive, unless the employer otherwise agrees, the employee will not be able to work for a different employer while on furlough. If the contract is part-time, for specific services or non-exclusive then they could potentially work for another employer. Individuals are able to volunteer during furlough even if they have an exclusive contract.

David Whitehead, Associate, Simkins LLP