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30 September 2020
Job Support Scheme
What if a job is viable in the long term but there is not currently 33% of work available?
Will employers choose alternative contracting arrangements instead of the scheme?
Will employers give employees the choice?
What happens to employees who do not want to return to work?
What should employers do now?
Chancellor of the Exchequer Rishi Sunak has announced a new Job Support Scheme to replace the furlough scheme. It will start on 1 November 2020 and run for six months. This article sums up the key features of the scheme and looks at the important questions from an employment law perspective.
The furlough scheme will end on 31 October 2020 as planned.(1) The new Job Support Scheme will start immediately afterwards on 1 November 2020 and continue until the end of April 2021. The scheme will provide ongoing wage support for people in work, provided that:
The government has published a Winter Economy Plan which gives a brief outline of the Job Support Scheme and a factsheet. Further details are expected over the next few weeks, but the key points are as follows:
Some employers have no work at all for employees in certain job roles. Employers cannot simply conjure up work for employees to do. This is a current problem for employers in sectors such as sport and entertainment but could also be the situation facing many employers in the event of local lockdowns or further restrictions imposed to control the pandemic.
It seems that employers will need to consider redundancies for employees where there is simply no work available now, even if their jobs are viable in the longer term. For highly skilled employees, there may be the option of agreeing periods of unpaid leave. If there is a local lockdown, it seems likely that the government will have to release employers from the obligation to provide 33% of usual working hours if this is impossible in light of local restrictions, but would employers have to cover those wage costs?
It is arguably misleading to call the scheme a government subsidy, because this implies that the government is paying for costs that employers would otherwise have to shoulder. However, some employers may be able to negotiate or operate reduced working hours arrangements which do not require them to add any additional financial support.
For example, the government factsheet gives the example of Beth, who normally works five days a week and earns £350 a week. The company puts Beth on the Job Support Scheme working two days a week (40% of her usual hours). Her employer pays £140 for the days that she works. Her employer would also pay an additional £70 for the days that she does not work. Therefore, Beth's two days cost her employer £210, which is 50% more than they would normally cost. Some employers will instead look to agree a reduced working week with Beth in which she is simply paid £140 for the hours that she works, but without the extra financial support. Beth would then lose out on the additional support from both the government and her employer, but from her employer's point of view it saves £70 for the same amount of work. Contractual arrangements may be relevant here: some employers may already have the contractual right to:
Of course, the existing furlough scheme currently operates in a similar way. From August 2020, employers had to begin making contributions towards their employees' wages, beginning with national insurance and pension contributions and culminating in a 20% contribution towards wages in the final month of October 2020.
Some employers may give employees the choice of going on to the Job Support Scheme or taking redundancy.
If the redundancy costs are similar to, or would outweigh, the amount that employers would need to pay under the Job Support Scheme, this is clearly an incentive to put an employee into the scheme instead of making them redundant. If an employee was furloughed, employers also have the additional incentive of the job retention bonus.
Some employees are still reluctant to return to their workplace because, for example, they are particularly vulnerable to COVID-19 or someone whom they live with is particularly vulnerable to COVID-19. If they cannot work from home, they will need to work at least 33% of their usual hours at their workplace in order to be put into the scheme. This may generate disputes about whether it is safe for such employees to come back to work, but many may feel that they have little choice.
Some employers are reported to be paying back furlough grants as their trading conditions have bounced back or proved not to be as bad as they had expected. The new scheme aims to target financial support only at businesses that need it most.
The new scheme will be available to larger employers only if they meet a financial assessment test showing an adverse impact from COVID-19. However, small and medium-sized enterprises (SMEs) will automatically qualify if they have:
Further details are awaited in respect of what the financial assessment test will cover, the time period taken into account and the definition that the government will use for determining what counts as a 'large company' or an 'SME'.
Employees who work 33% of their usual hours will end up receiving 78% of their normal wages (unless they are affected by the cap). What happens to the missing 22%? It is likely that employers will negotiate a reduced pay arrangement with the employee, in the same way as they have done for furloughed employees where they are not topping up. However, the factsheet contains the curiously worded sentence "[o]ur expectation is that employers cannot top up their employees' wages above the two-thirds contribution to hours not worked at their own expense". At first sight, this suggests that the government will be requiring employers not to put in any extra top-ups. However, arguably the most sensible interpretation of this sentence is that the government does not expect employers to be able to afford to put in any further contribution – but not that they are legally barred from doing so. In other words, it may still be open to employers to top up pay to 100% at their discretion or alternatively to seek employees' consent to the reduced level of pay that the scheme offers. However, further clarification is needed.
While important details are still awaited, employers that wish to make use of the scheme may nevertheless need to move fast with little over a month until it comes into effect. Key decisions include:
It promises to be a busy few weeks.
For further information on this topic please contact Lucy Lewis or Colin Leckey at Lewis Silkin by telephone (+44 20 7074 8000) or email (email@example.com or firstname.lastname@example.org). The Lewis Silkin website can be accessed at www.lewissilkin.com.
(1) For further information please see "Furloughing employees - FAQs for employers on the coronavirus job retention scheme".
(2) For further information please see "Government to pay bonus for retaining furloughed workers".
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