Chancellor Rishi Sunak yesterday set out the government’s new job retention measures in an attempt to support employers who face lower demand over the next six months due to Covid-19.
While more information is coming out all the time about the scheme, Bath law firm Mogers Drewett’s employment partner Sean McDonough answers some of the key questions employers will have at this time.
What is the Job Support Scheme?
Starting on November 1, the Job Support Scheme follows on from the Coronavirus Retention Job Retention (‘Furlough’) Scheme which ends on October 31 and will run for six months until April 2021.
How does it work?
Employees must work for a minimum of 33% of their usual hours and in return will receive at least 77% of their pay.
The hours an employee works can increase in months four to six of the scheme.
Working patterns can vary, but each short-time working arrangement must cover a minimum period of seven days.
For every hour not worked, the employer and the government will each pay one third of the employee’s usual pay, with the government contribution capped at £697.92 per month.
The employer will be reimbursed in arrears for the government contribution.
The government's grant will not cover Class 1 employer NIC or pension contributions, although they remain payable by the employer
Who is eligible?
All small and medium-sized enterprises (SMEs) will be eligible; large businesses will be required to demonstrate that their business has been adversely affected by Covid-19 before being able to claim.
It is open to all employers with a UK bank account and a UK PAYE scheme and to all employees, so includes those currently furloughed as well as those currently working providing an employee is not on notice of redundancy.
How does the new scheme differ from furlough?
Under the current furlough scheme any employee who is furloughed must not work and can be on notice of redundancy. In return the Government contribution up until the end of October will be 60% of wages up to a cap of £1,875. Employers pay employer NI and pension contributions, and will have to pay 20% of wages to make up to 80% of the total wages, up to the £2,500 cap.
Under the new scheme from November 1 employees must work at least 33% of their usual hours and, in stark contrast to the Coronavirus Job Retention Scheme, cannot be working out their redundancy notice.
Under the new scheme the government will contribute one third of salary costs up to a cap of £697.92 per month. Employers pay employer NI and pension contributions, and the wages for hours worked plus the remaining third of wages to make up to 77% of an employee’s total wage.
Can employees refuse to work 33% of their usual hours?
Any agreement already in place until the end of October between an employer and employee still stand. Employees could, however, refuse to agree to new changes after an initially agreed period has expired.
Employers will need to consult individually with each employee and attempt to explain the reasons and necessity for the change in hours. If the employee still refuses after additional time and further discussion, you will need to decide if dismissal is your only option.
Dismissals in these circumstances can be fair, so long as there is a clear business necessity for reducing an employee’s hours and the employer has followed a fair process. Dismissal and re-engagement in this way will trigger collective consultation requirements where 20 or more dismissals are proposed.
Is it unfair to make employees redundant given the new scheme?
No, if business has fallen to such a level that there is not enough work for all of your employees to meet the 33% requirement, then it is likely to be reasonable to make redundancies.
Employees with two or more years’ service can claim unfair dismissal. The fairness of a redundancy dismissal therefore depends on all the circumstances at the time, so it is not necessarily unfair to make employees redundant when furlough is available.
What other options are there to redundancy?
Given the unique nature of the situation caused by the pandemic, employees may be more open to exploring alternative options to redundancy. Employees may be willing to agree to alternatives if it could mean they remain employed until the situation improves and redundancies may no longer be necessary.
Many employees will have been personally affected by the pandemic and may not want to return to work until much later or have childcare issues where grandparents or other after school carers continue to need to shield. Employers can discuss options such as using unpaid statutory parental leave or granting unpaid sabbaticals.
If you have a contractual right to lay off without pay, this could be relied on. Lay-off provisions are subject to the implied term of trust and confidence which means, that you should consult with employees first and give reasonable notice of any lay off to avoid being in breach of contract.
There are also specific statutory provisions which provide a right for employees who have been laid off for four or more consecutive weeks, or six weeks in any 13-week period, to claim a statutory redundancy payment in certain circumstances. However, there are steps that must be followed in order to receive their redundancy payment.
In summary the new scheme provides employers with the option to retain roles long term where demand has fallen and remains low. Under the new scheme employers now have the flexibility to restructure their workforce to meet demand now while being able to increase hours worked in months four to six to meet increased demand in the future.
As always employers will need to consult with their employees to explain the reasons and necessity for the changes to ensure everything is done by consent and confirmed in writing.
Over the coming days more detail will no doubt appear for advice at this time contact Sean McDonough on 01225 750 000 or email sean.mcdonough@mogersdrewett.com
