THE GOVERNMENT'S NEW JOB SUPPORT SCHEME

- FURLOUGH PART 2 - 

You can also watch our video update on this topic here

Just a short time ago the government announced that they would continue to provide financial support to employers and employees in respect of wages in order to “protect viable jobs” beyond the end of October when the furlough scheme comes to an end.

So, what does this mean? What support will the government provide and what are the conditions placed upon that support? 

When the furlough scheme was introduced employers were faced with uncertainties for many weeks as we all explored the scheme, the unintended loop holes and problems which are inevitably discovered when such a huge and unprecedented scheme is introduced at such short notice. 

This new scheme is focussed upon those businesses who remain viable but still need some help for longer to enable demand to recover whilst the economy remains affected.

So, have I got to learn the rules of an entirely new scheme? Well, yes. The Job Support Scheme is fundamentally different to furlough in a number of ways, which we have set out below. 

Means testing

There will be a financial assessment test for employers with more than (we assume) 250 employees. For those larger companies the test will ensure that funding is only provided to large companies who can demonstrate that their turnover is lower now than before experiencing difficulties with COVID-19.  

There is an “expectation” in the government announcement that large companies will not be making dividend payments or share buybacks whilst accessing the grant during this 6-month period. We are sure that this 'expectation' will be backed up with more specific rules in due course.

SMEs (those with less than 250 employees) will not be subject to the financial assessment test and will be able to make dividend payments and share buybacks.

Relevant Dates

An employee must be on the payroll on or before 23 September 2020 to qualify. This means that the RTI submission notifying payment must have been made to the HMRC on or before 23 September 2020. Employers don’t need to have used the original furlough scheme in order to be able to access this new scheme.

How much time needs to be worked?

An employee must work at least 33% of their normal hours. The government has indicated that they will review this threshold after 3 months with a view to increasing it. 

How flexible is the scheme?

There is flexibility in the scheme to allow for working (for example) full time one week and then working 33% the following week. The scheme doesn’t allow for the day to day flexibility of the current flexible furlough scheme though. The scheme from 1 November requires periods of 7-days. That is the period of

How much can be claimed?

Employers can claim for every hour not worked by an employee, as long as they have worked at least 33% of their normal weekly hours. 

The amount claimed is one third for the hours not worked. This means that for the remaining 66% of hours, the employer can claim a third of that, which is equivalent to 22% of the total weekly wage for that employee, capped at ￡697.92 per month. It therefore follows that the 22% contribution by the government will fall as a proportion of salary in the event that the employee earns more than ￡38,068.

The grant does not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.

Can we top up?

Rather strangely (in our opinion) the “expectation” (that word again) is that employers “cannot top up their employees’ wages above the two thirds. Whilst initially this seems a little odd, we suspect that the logic behind this decision is to ensure that if an employer can afford to top up, it doesn't need government support.  

What do we need to pay?

As you would of course expect, employers must pay employees their contracted wages for hours worked as usual. per normal, and the Government and employer contributions for hours not worked. Our expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.

Given that employers will then not be paying the normal contractual amount for the hours not being worked, an contractual agreement will be needed between employee and employer to set out the arrangements for hours and pay in the period from 1 November 2020 until the end of April 2021. Without such an agreement employers will be exposed to unlawful deduction for wages claims and constructive unfair dismissal claims.

Can we make employees redundant (or issue notice of redundancy) whilst they are on the scheme?

No. Or to clarify properly, you cannot make a claim under the scheme whilst the employee is under notice of redundancy. However, it must be the case that an employer can take an employee off the scheme to then make them redundant so there is not an absolute ban on redundancies. But employers will not be able to fund notice pay in the way that they did under the furlough scheme – a practice which drew criticism from some quarters but was entirely within the rules of the scheme.

What about the Job Retention Bonus Scheme?

Employers that use the new Job Support Scheme can still claim the Job Retention Bonus of ￡1,000 per employee if they meet the relevant criteria, namely:

• That they have brought employees back into work from furlough;
• Those employees have been retained in their employment until the end of January 2021

Are the plans for Wales any different?

No, the furlough 2 scheme applies in Wales in the same way that it does in England and Scotland. However, the Welsh government have urged the government to introduce further measures to promote job creation as highlighted in the ￡90m scheme that has been launched in Wales to support those looking for work and also providing education and training to those wanting to start their own business. 

Will the scheme work?

The problem with the scheme is that by identifying “viable” jobs as those which require people to work at least 33% of their hours disadvantages those such a events, hospitality, training and the arts where many are unlikely to be able to achieve the requirement to work such hours. Employers can’t just magic up 33% of work if it isn’t there. This may also become an issue where local lockdowns – which are becoming increasingly common – take hold. 

It is also evident that some employers may seek to use lay-off and short-time working (where the contractual right to do so exists) given what may be perceived by some companies as a high wage contribution to keep jobs going. 

Other options for employers will be to simply agree reduced hours with their staff. For example, if you have 40% of the work available for an employee, then you may wish to agree to pay them 40% of their wage. If you were to use the scheme you would end up having to pay 60% of their wage (the government paying 20%). Whilst the employee is clearly better off, it does not follow that employers must use the scheme if they can agree other arrangements and employees may well still agree to those arrangements which are less beneficial for them if the alternative is redundancy.

More details of the scheme will be confirmed in further guidance to be published by the government in due course. We will of course keep you fully updated.

WOULD YOU APPRECIATE SOME SUPPORT?

Need help with your employment and HR issues? Are you:

• fed up of talking to call centres;
• after a more cost effective advice provider;
• wishing for a more integrated relationship with your advisers, one where they understand your business and help you make risk informed but business focussed decisions.

Then get in touch. We have many different employment support packages to suit and provide help in relation to:

• Advice by telephone, email and video conferencing;
• Face to face advice (government guidance permitting) and regular surgeries with HR, senior managers and line managers;
• Getting your business compliant with the drafting of policies, procedures and contracts;
• Representing you in Employment Tribunals.

MATTHEW HUGGETT

Partner, Carbon Law Partners

E: [email protected]

P: +44 (0)117 332 8333

M: +44 (0)749 612 6266