New Job Support Scheme to replace furlough scheme
24 September 2020
The Chancellor has announced a new Job Support Scheme to replace the furlough scheme. It will start on 1 November 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 come to an end on 31 October 2020 as planned (see our FAQs on furloughing employees). 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 employer meets certain access conditions, the employee is working at least 33% of their usual hours, and the employer also provides additional wage support.
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.
- No sector distinctions. The Job Support Scheme is not limited to any particular sectors or settings.
- Employees must be working at least a third of their normal hours. The employee must be paid for that work as normal by their employer. This differs from the furlough scheme which allows employers to claim a grant for employees who are fully furloughed and doing no work at all. The intention is to support viable jobs, rather than support jobs that are effectively already redundant.
- Employers and government share the extra wage support for unworked hours. For every hour not worked the employer and the government must each pay one third of the employee’s usual pay, and the government contribution will be capped at £697.92 per month. The government factsheet sets out the percentage amount that the government grant will cover dependent on the proportion of hours actually worked. The government will contribute a maximum of 22% for employees working only a third of their usual hours. Our infographic below shows how this works.
- Restricted employer access. All small and medium sized businesses will be eligible for the Job Support Scheme. However, larger businesses will be eligible only if they can demonstrate that their business has been adversely affected by the Covid-19 pandemic. This differs from the furlough scheme which had no restrictions on access and did not involve a requirement to prove any downturn.
- No redundancy notice costs. Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant. However, it seems that employees can be moved out of the scheme during the 6-month period in order to be made redundant, so it does not involve a ban on redundancies. The employer cannot however claim the grant for any employee once it has given notice of redundancy or made the employee redundant.
- Jobs retention bonus still payable. Employers can claim under both the new Job Support Scheme and the jobs retention bonus scheme – see our article on the job retention bonus scheme for more details.
- No need to have used the furlough scheme. The Job Support Scheme will be open to employers even if they have not previously used the furlough scheme.
- Restrictions on capital distributions to shareholders. The details released so far state that the government expects that large employers will not make capital distributions (such as dividends) while using the scheme.
- Extension to Self-Employed Income Support Scheme (SEISS). The government is also extending the SEISS by providing two further grants to self-employed individuals who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand due to COVID-19. The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, capped at £1,875 in total. The second grant will cover a three-month period from the start of February until the end of April and the level has not yet been set.
The Job Support Scheme raises some important questions from an employment law perspective:
What if a job is viable in the long-term but there is not currently 33% of the work available?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 not possible in the light of local restrictions, but would employers then have to cover those wage costs?
Will employers choose alternative contracting arrangements instead of the scheme?
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 the employer to add any additional financial support.
For example, the government factsheet gives the example of Beth, who normally works 5 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). The employer pays £140 for the days she works. The employer would also then pay an additional £70 for the days she doesn’t work. Beth’s two days therefore cost the 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 she works, but without the extra financial support. Beth would then lose out on the additional support from both the government and the employer, but from the employer’s point of view it saves £70 for the same amount of work. Contractual arrangements may be very relevant here: some employers may already have the contractual right to reduce working hours or (as in the case of casual or zero hours workers) to pay only for hours worked, or both.
The existing furlough scheme of course currently operates in a similar way. From August, employers were required 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.
Will employers give employees the choice?
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 the employer would need to pay under the Job Support Scheme then this is clearly an incentive to put an employee into the scheme instead of making them redundant. If the employee was furloughed then the employer also has the additional incentive of the job retention bonus.
What happens to employees who don’t want to return to work?
Some employees are still reluctant to return to their workplace because, for example, they are Covid-vulnerable or someone they live with is Covid-vulnerable. If they cannot work from home then 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 those employees to come back to work, but many may feel they have little choice.
What are the access conditions for employers?
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 is intended to target financial support only at businesses that need it most.
The new scheme will only be available to larger employers if they meet a financial assessment test showing an adverse impact from coronavirus, although SMEs will automatically qualify provided they have eligible employees, a UK bank account and a UK PAYE scheme. Further details are awaited in respect of what the financial assessment test will cover, the time period taken into account, and the definition the government will use for determining what counts as a large company or a SME.
The missing 22%
An employee who works 33% of their usual hours will end up receiving 78% of their normal wages (unless they are impacted by the cap). What happens to the missing 22%? Our assumption is that employers will negotiate a reduced pay arrangement with the employee, in the same way as employers have done for furloughed employees where they are not topping up. However, the factsheet contains the curiously worded sentence “Our 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, we do not think that this should be the correct approach. In our view, 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 would 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.
What do employers need to do now?
While important details are still awaited, employers who 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 whether to make use of the scheme at all, whether (if these are indeed permitted) to “top up”, whether to offer access to the scheme to all staff or just some (and, if the latter, how to select those who will be preferred), what collective and individual consultation needs to take place before the scheme is introduced, and how to go about obtaining employee consent. It promises to be a busy few weeks…
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