The Chancellor’s Job Support Scheme (JSS), announced on 24 September is intended to further soften the blow of the continuing economic crisis caused by the Covid-19 pandemic, as we move into the second wave in the U.K and brace ourselves for its economic impact.
Whilst the current Job Retention Scheme (JRS) ends on 31 October, leaving those who have been placed on furlough in a precarious position, notwithstanding the fact that many employers sought to reassure its employees who were placed on furlough that this was not a pre-cursor to their redundancy, the Government has decided that economic support is still required.
However, this support will only be in place for those jobs deemed to be viable. This means that sectors such as arts e.g. theatres, live music venues and nightclubs which have not been able to reopen due to the pandemic will not be able to benefit from the scheme for many or any of their employees, if those jobs will not be viable. The hospitality sector is likely to take advantage of the scheme but we will have to watch this space in the retail sector, with the demand for online shopping continuing to increase rapidly, but footfall to the High Street in sharp decline.
Sadly, this is likely to lead to many more redundancies, particularly in the sectors hardest hit by Covid restrictions such as hospitality, leisure, and retail. If employers are considering collective redundancies, they are out of time to effect these prior to the end of the furlough scheme at the end of October, if they have not already commenced the collective consultation process.
From 1 November, employees working at least a third of their normal working hours and on their employer’s PAYE payroll on or before 23 September will be eligible for the scheme, which will run for the next six months. This means that unlike with the JRS, new employees will be eligible. All employers are eligible. SME’s are automatically eligible, but larger businesses will have to show that they have been adversely affected by the pandemic in respect of their turnover.
Of the remaining hours an employee does not work, the government will pay a third of this amount up to a cap of £697.92 per month, with the employer also paying a third on top of the pay due for the actual hours worked. This is a significant increase in costs for employers who must pay 55% of an employee’s wages in return for them working just 33% of their normal hours, compared to a 20% contribution from October under the current JRS, although furloughed employees could not do any work at all for their employer.
This means the JRS does not cover wages in respect of the remaining third of an employee’s unworked hours – up to 22% for an employee working the minimum hours required under the scheme. Any additional payments made to the employee would be at the employer’s discretion. However, the government states that it expects employers “cannot” top up wages in respect of unworked hours. Whether this is to be interpreted as an expectation that employers will not have the means to top up or whether the government will prohibit topping up remains to be seen, but given that employers have could top up furloughed employees’ wages, it would be inappropriate not to allow it under the JSS, and we do not believe that this is the intention.
For employees whose jobs are deemed to be viable and are retained, the JSS is good news, as they will only suffer a 3% reduction to their pay from the current JRS under which furloughed employees received 80% of their wages subject to the Government cap. Such employees will want to know whether they can work part-time for other employers too, to top up their wages. This needs to be addressed swiftly by the Government.
The key distinction between the JSS and the JRS is that the employee must be working. Employers should therefore determine whether they feel their employees’ roles are viable for the scheme. They will need to consider whether the needs of their business are better suited to fewer employees working more hours or more staff working part-time hours under the new JSS. Where the business is based on strong long-term customer relationships, the former may suit the business better than the latter. There has also been much commentary in the press to the effect that when employers crunch the numbers they will realise that keeping employees on under the JSS will cost them more in practice than retaining fewer full time employees.
Employers should be aware of the potential of indirect sex discrimination claims from female members of staff who may be let go rather than retained on a part-time basis under the new JSS, which may suit them better if they are the primary carer for their children.
Employers are eligible for a Job Retention Bonus of £1,000 in respect of each previously furloughed employee who is retained until at least 31 January 2021. However, if such employees are retained under the JSS, then the employer is committing not to make them redundant for at least a 6-month period, which will extend to the end of April, 3 months beyond the end of January.
Any employees benefitting from the job support scheme are protected from redundancy during the period for which their employer is claiming the grant. Presumably, this will not however prevent employers from dismissing employees during the 6-month period for other valid reasons, such as performance/capability or misconduct.
We await further clarification of what the penalty will be if employers do seek to make employees redundant because circumstances change during the 6-month period of the JSS. Will they have to repay to the Government all payments received under the JSS & the £1000 Job Retention Bonus? If the business goes into administration, it will be much harder for the Government to reclaim such sums.
Employers must remember to obtain their employees’ written consent to the new part-time working arrangement, as it will constitute a variation to their contractual terms, particularly where they worked full time previously. Most employees are likely to agree to this change.
The Government will consider whether to increase the minimum hours’ threshold three months into the scheme. This depend on whether there are signs that the pandemic is easing in the UK and whether the economy is growing sufficiently. Given the additional restrictions that the Government introduced last week and the fact that a local lockdown in London is looking more likely, we shall have to watch this space.
While an extension to support for employers and employees is welcomed, much remains uncertain as to the impact of this reduced financial assistance. Whilst it makes commercial sense for the Government to focus on protecting viable jobs that can ride the wave of the pandemic, there will be a terrible human cost to pay in terms of the large numbers of employees who will inevitably be made redundant as a result.
