The Chancellor has announced a sweeping package of new support for businesses in advance of the current Coronavirus Job Retention Scheme coming to an end next month, including a new Jobs Support Scheme which will run for six months from November 2020. The government had faced increasing pressure from employers and trade unions in recent months to extend the furlough scheme, particularly for those sectors of the economy which have been unable to fully reopen following the relaxation of lockdown restrictions.
The current job retention scheme, which ends on the 31st October, allows employers to furlough employees, either completely or on a flexible basis, with the government picking up most of the cost of normal wages. Initially the support available covered the entirety of minimum payments to employees, i.e. 80% of normal pay. However, in August employers had to begin contributing to employees’ wages by paying employer’s NI and pension costs. Since September employers have also had to contribute 10% of minimum salary, and this will rise to 20% of salary in October.
Unlike the initial furlough scheme, which was designed to protect wages and jobs while employees had to stay at home, the new scheme aims to keep employees at work while recognising that continuing restrictions may limit working hours. To be eligible, employees must work at least a third of their normal working hours and be paid as normal for these hours. The government and the employer will then cover two thirds of lost wages. There is not yet any information on how this will affect ‘zero-hour’ workers or those on variable hours, but for the latter, some form of averaging hours might be applied in line with the furlough scheme.
The scheme essentially allows employers to place employees on a form of short time working with the government meeting some of the cost of lost wages, and the employee and employer sharing the cost of the remaining lost wages. Short time working is already a familiar concept in UK employment law, and allows employees to claim certain payments, including a redundancy payment, if their hours are cut to the extent that they receive less than 50% of normal wages for an extended period.
All small and medium sized businesses will be eligible to use the new scheme, and large businesses will also be eligible provided they have experienced a drop in turnover. Employers will be able to use the new scheme even if they have not previously used the furlough scheme. Those who have used the furlough scheme, and are planning to claim the Job Retention Bonus in January, will also still be eligible to use the Job Support Scheme.
A joint statement released today by the employment advisory and conciliation service Acas, the Confederation of British Industry (CBI) and trade union the TUC encourages employers to exhaust all available options before considering making redundancies. However, the reality is that it may be too late for the many thousands of businesses who have had to make tough decisions to cut staff numbers. Despite the support available thus far, many employers have been unable to avoid making redundancies, either because they simply cannot afford even the modest contribution to salary that has been required since August, or because their financial forecasting has led them to conclude that cuts are necessary notwithstanding any further government support.
Employers in the midst of redundancy processes will now need to consider whether the new scheme gives sufficient support to allow compulsory redundancies to be avoided. As was the case with the furlough scheme, it is possible that failure to make use of government support could be a factor for tribunals to consider when determining whether a dismissal is legally fair. As a result, employers should be careful to clearly communicate their rationale for continuing with redundancies if they choose not to utilise the new scheme.
Employers who do choose to make use of this new form of support should also give careful consideration to how it is implemented. We do not yet have detailed information about how the scheme will be administered but it is likely that, as with the furlough scheme, employers will need to seek agreement from staff to implement what is essentially a temporary change to terms and conditions. In addition, employers should always aim to avoid any implicit discrimination when deciding what measures to put in place in respect of a group of staff.