In the wake of further social distancing restrictions, and under pressure from unions and businesses alike to protect jobs when the Coronavirus Job Retention Scheme (CJRS) comes to an end on 31 October 2020, the chancellor has finally announced a new scheme which will run for six months from 1 November 2020 until the end of April 2021. The Job Support Scheme looks very different to the current CJRS and is said to be designed to protect viable jobs.
But what is it and what does it mean for workers?
The current CJRS - a recap
Since 1 July 2020, employers have been able to flexibly furlough employees. This meant that employees who had been fully furloughed for at least three weeks between 1 March and 30 June 2020 were able to come back to work on a part-time basis and remain on furlough for the other days that they would have worked prior to the onset of the pandemic and the introduction of the CJRS.
For example, a worker who would have worked five days a week before being furloughed between 1 March and 30 June 2020 may have come back to work after 30 June 2020 for two days a week and remained on furlough for the other three days of the week. In those circumstances, the worker would receive full pay for the two days worked and furlough pay for the days not worked. From 1 September 2020 furlough pay is based on 70 per cent of regular wages up to a cap of £2,187.50 per month (not including discretionary payments or non-monetary benefits).
What is the Job Support Scheme?
The Job Support Scheme (JSS) will start on 1 November 2020 and run for a period of six months until April 2021.
There are very few details currently available about the scheme other than those contained in a “fact sheet” which has been published. Broadly speaking, under the JSS the government will make a contribution towards the wages of employees who work less than their normal hours, provided their employer is able to provide them with work for at least one third of the hours that they would ordinarily work. This contribution will be paid in the form of a grant which employers will have to claim back from the government after it has paid its employees.
Who will the scheme apply to?
The scheme applies to all employers with a UK bank account and UK PAYE scheme. However, large businesses will have to meet a financial test which demonstrates that their turnover is lower as a result of coronavirus (COVID-19). The government also expects large employers not to pay out dividends or share buybacks if they use the JSS.
Unlike flexible furlough, the JSS will apply to all workers and not just those who were previously furloughed between 1 March and 30 June 2020. However, employers will only be able to claim the grant for those employees who are on their PAYE payroll on or before 23 September 2020 and crucially who work for at least a third of their normal hours.
Employers will not be able to claim for workers who are made redundant or who are under notice of redundancy.
How will it apply in practice?
The employer must reach a written agreement with workers about any short time working arrangements and any resulting changes to their contracts of employment. The agreement must be made available to HMRC.
Workers will receive their normal pay for any hours that are worked, which will be paid by their employer.
For the hours that are not worked, the government will contribute one third of their pay subject to a cap of £697.92 a month and the employer will be required to contribute one third. This means that the worker will receive two thirds of their pay for the hours they do not work.
Workers can be moved on and off the scheme but each short time working arrangement must cover a minimum period of seven days.
What are the implications of the scheme?
The stated aim of the scheme is to protect those jobs which, according to the government fact sheet, are “viable in businesses facing lower demand over the winter months due to COVID-19.”
But will it actually do this? We think not.
First, unlike the CJRS, employers cannot claim for workers who are not able to work at all. For those currently employed in sectors hardest hit by the current restrictions such as retail, leisure and the entertainment sector, and for whom no work is available, redundancy remains the likely outcome when the CJRS comes to an end. Furthermore, where local restrictions mean it is not possible for an employer to offer work to employees for a third of their normal working hours, the JSS will not apply with the result that redundancies may ensue.
Secondly, even where workers can work reduced hours, employers may find that the value of the grant from the government is not enough for the business to remain viable as they will have to pay for all those hours the employee works and for at least a third of the hours not worked. A table included within the fact sheet shows that where an employee works a minimum of a third of their hours (33 per cent) the maximum contribution by government is just 22 per cent, as compared with a 55 per cent contribution for employers.
Given the financial assistance available through the JSS is relatively modest, employers may choose not to apply for it at all and instead seek to reduce hours of work for employees or introduce other changes to terms and conditions.
What can unions do?
Unions will want to begin discussions quickly as to whether employers want to make use of the JSS and to encourage them to do so if they intend to introduce measures to reduce working hours or make redundancies.
Our initial view is that in a workplace where the union is recognised, it is likely it will be able to agree revised contractual arrangements on behalf of employees to implement a JSS. Clarification on this point is awaited.
Any agreement that is reached in respect of implementing the JSS should be approached in the same way as it would be if the union was agreeing to reduced working hours under normal principles.
It should therefore state the following:
- It is a temporary expedient for a prescribed number of months and not a permanent variation to terms and conditions;
- That the calculation of notice pay and statutory redundancy pay will continue to be calculated on the basis of full hours and pay where the employer proposes redundancies at any point in the future; and
- Set out how holiday pay will be calculated, including where a payment is made in lieu of untaken holiday if the employee is made redundant.
Conclusion
While we welcome the government’s attempts to avoid what has been termed a potential “tsunami of redundancies” when the CJRS ends, we remain doubtful this scheme goes far enough, particularly in those industries which have been worse hit by the pandemic.
Articles shared by Thompsons relating to coronavirus (COVID-19) are correct on the time of publication. You should check the government's guidelines for the latest information and advice at https://www.gov.uk/coronavirus.