The Coronavirus Job Retention Scheme (commonly referred to as the Furlough scheme) is due to come to an end on 31 October 2020, despite growing calls from MPs, industry and trade unions for it to be extended.
From 1 September 2020, changes to the furlough scheme saw the government’s contribution reduced to 70% of wages for furloughed hours up to £2,187.50 a month. To make up the 80% total (subject to the £2,500 cap), employer contributions rose to 10% of wages plus employer NICs and employer pension contributions. The government contribution will be further reduced to 60% from 1 October 2020.
With the end of the scheme approaching and the gradual reduction of Government support placing increased pressure on finances, many businesses are having to contemplate reducing their employee headcount and making redundancies. A BBC Freedom of Information request revealed that based on filed HR1 forms, over 3, 500 employers are planning to make 300, 000 redundancies between them. HR1 filings are only required where 20 or more redundancies are proposed in a 90-day period and so they do not take into account employers planning to make redundancies of less than 20 employees. Accordingly, total job losses are expected to be much higher than 300, 000.
Job Support Scheme
With the furlough scheme ending on 31 October 2020, the Chancellor announced the Job Support Scheme (JSS) to safeguard viable jobs in businesses who are facing lower demand over the winter. The scheme will run for six months from 1 November 2020. The JSS is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce.
In outline, the scheme will apply as follows:
- An employee will need to work and be paid for at least one-third of their normal hours (33%). For the employee’s remaining hours (67%), one-third (22%) is paid by the employer and one-third (22%) is paid by the government. The level of the government grant will be calculated based on the employee’s usual salary, capped at £697.92 per month. This means that an employee will receive at least 77% of their pay (where the government grant has not been capped). The employer will be reimbursed in arrears for the government contribution. It appears that the JSS will not be available for employees who have been given notice of their redundancy.
- All small and medium sized businesses will be eligible. Larger businesses will only be eligible if their turnover has fallen during the pandemic and the government expects that they will not be making capital distributions (such as dividends) while using the JSS.
- The JSS will be open to employers throughout the UK with a UK bank account and UK PAYE scheme regardless of whether they have used the furlough scheme.
Job Retention Bonus
For employers who can bring their furloughed staff back to work at the end of the furlough scheme, the Government’s “Plans for Jobs” announced in July included the introduction of a Coronavirus Job Retention Bonus. This will provide for employers to receive a £1,000 one-off payment for each employee they bring back from furlough and continuously employ through to January 2021.
To be eligible, the employer will need to pay the employee at least £520 on average in each month from November 2020 to the end of January 2021 (equivalent to National Insurance lower earnings limit). Employers will be able to submit claims after they have filed PAYE for January and payments will be made from February 2021.
Where redundancies are unavoidable, employers must ensure that they follow a fair procedure, including consulting with employees and using fair and objective selection criteria. Employees who have two years or more length of service are entitled to statutory redundancy pay and additionally have the right to challenge the fairness of their selection for redundancy to an Employment Tribunal. Carmel Sunley can advise further on fair redundancy procedures as necessary.