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.
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 GBP 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 GBP 140 for the days she works. The employer would also then pay an additional GBP 70 for the days she doesn’t work. Beth’s two days therefore cost the employer GBP 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 GBP 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 GBP 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…