Divorce is increasingly an important issue for employers. Family breakdown most commonly affects individuals in the age range 45-55, so often impacts the productivity of senior management. Most responsible employers are working towards the UN Sustainable Development Goals- one of which is of course health and wellbeing, so supporting employees to divorce well is becoming a big issue.
An added factor in the current climate is the impact of Covid-19. We get a huge number of enquiries about the impact of the pandemic on the financial aspects of divorce, in particular spouses looking to reduce their maintenance payments due to furlough or redundancy, or re-assessing a proposed financial settlement in the light of a huge downturn in company performance, share prices and income levels.
The more employers know about the legal backdrop, the better they can support their employees, at the very least to direct them, and their ex-spouses, to get fully informed about what changes in their income can mean for their wider family situation.
For couples who are separated or separating, this issue is particularly pressing: whether paying or receiving maintenance they will want to be able to budget with confidence. What can be done?
Fundamentally, they must be realistic. The ability to pay maintenance is not immune from the current economic headwinds, but nor can dependent spouses suddenly live off fresh air at a time when jobs are hard to come by. There is going to have to be a good deal of give and take as the situation unfolds. What follows are our top tips for navigating this difficult area:
- Wherever possible, the first port of call is to try to agree child maintenance arrangements as between the couple, reflecting the current uncertainties. Each of a child’s parents has a duty to provide support, not just the maintenance payer.
- If agreement is proving difficult, remember that (unless the paying party falls within certain defined exceptions, such as earning more than £3k gross per week) child maintenance arrangements will be governed by the Child Maintenance Service or CMS (what used to be known as ‘the CSA’), rather than by a court. The precise figure is arrived at by applying a formula to the payer’s gross income, after pension contributions. The number of nights any relevant children spend with the payer will affect the sum payable.
- There is a useful ‘child maintenance calculator’ on the gov.uk website which will point your employee in the right direction. You have to input the appropriate figure for the payer’s gross income, so you are perfectly free to take account of any recent or anticipated reductions in income, from being placed on furlough for example.
- Bear in mind, however, that this probably won’t be the approach taken by the CMS itself:
- Gross income will instead invariably be calculated by reference to a payer’s income as most recently declared to HMRC.
- This means that the system lacks the flexibility to respond as nimbly to the current circumstances as your employee may wish it to. For example, the CMS has the power to consider a payer’s current income only if it differs from that declared to HMRC by 25% or more, so presently furloughed workers on 80% of wages will not qualify.
- Whilst it may be tempting for the maintenance payee to continue receiving maintenance predicated on a level of income which the payer no longer earns, this will come out in the wash when the current year’s tax return, showing much lower receipts, is utilized to calculate next year’s maintenance dues – even if earnings have by then recovered to their previous levels.
- In the event the level of child maintenance payments really cannot be agreed, then either the paying or receiving party can apply to the CMS to determine the sum payable. As might be expected, reduced staffing levels is leading to delay in the processing of applications, and also in the enforcement of arrears.
Maintenance for a spouse:
- Again, it is much better to agree a mutually acceptable figure wherever possible. In doing so, take the long view: if your employee is adjusting maintenance down by a minimal amount to reflect a corresponding small reduction in their income, they risk forever tinkering with the sum payable when circumstances change in the future. This can put pressure on the relationship over time.
- On the other hand, a material change in a payer’s circumstances cannot simply be ignored. If temporary cuts to monthly budgets are to be made, it will probably make sense to target those areas of discretionary spending which have been made difficult by the conditions of lockdown: restaurants, foreign travel and so on.
- As an aid to reaching agreement, your employee and their ex-spouse should consider what a court would do. Unlike with most child maintenance issues, the Family Court retains a power, enshrined in statute, to alter the sums payable where appropriate. In considering whether to do so, the court will take into account the most up-to-date financial information which is available. Taking expert legal advice as to your employee’s specific circumstances, and those of their ex-spouse, is key.
- Do not imagine a court would take time scrutinizing every line of a budget. There is nearly always a broad brush evaluation of (i) what is needed and (ii) what is affordable.
- Avoid court proceedings unless there is no alternative. The Family Court is under enormous pressure thanks to the demands of the pandemic and all families are specifically encouraged to take up alternative means of resolving disputes wherever possible. Many separating couples use a One Couple One Lawyer service such as ours, where your employee and their ex-spouse can obtain expert legal advice together as to what a court would do in their particular circumstances, which they can then use to reach an outcome which is fair to them both.
Samantha Woodham, Co-Founder and Family Law Barrister – The Divorce Surgery