For many employees and businesses, the impending removal of the Coronavirus Job Retention Scheme at the end of October was a worrying prospect. Despite its cost, the furlough scheme undoubtedly safeguarded a large number of jobs in the UK, but the Government made clear on a number of occasions that the scheme would not be extended. However, faced with an increase in the number of COVID-19 cases, and no immediate prospect of a return to normal working patterns, the Chancellor of the Exchequer has today announced his Winter Economic Plan.
For employers, the key focus will be on the successor to the Job Retention Scheme (which is due to come to an end on 31 October 2020). Essentially, the Chancellor has moved to safeguard those jobs that are viable. He has sought to allow businesses to keep employing people on shorter hours rather than dismissing them by reason of redundancy. The Treasury will help top up the salaries of those affected by the move to shorter working hours.
The key details which have been made available so far are as follows:
- The new scheme has been named the "Job Support Scheme" and will come into effect on 1 November 2020 for a period of six months (i.e. until 30 April 2021).
- Businesses do not need to have furloughed employees under the Coronavirus Job Retention Scheme to be eligible for the Job Support Scheme.
- The Job Support Scheme will allow employers to introduce "short time working". This means that employers can bring employees back to work for fewer hours than their normal working hours, similar to the current "flexible furlough" arrangement. Employers must be able to provide an employee with a minimum of one-third of their usual working hours in order to be eligible for support for that employee under the scheme.
- For the hours that employees work, employers must pay them their full pay. For every hour that an employees does not work, the employer and government will each pay one-third of the employee's usual pay. In other words, the employee will be paid two thirds of their normal pay for the time they do not work, albeit the government's contribution will be capped at £697.92 per month. Therefore, where the cap does not apply, an employee will earn at least 77% of their usual wage for working one-third of their normal hours.
- The Job Support Scheme could apply not just those being brought back from furlough, but also to reduce the hours of employees currently working.
- The Job Support Scheme will be automatically available to all small and medium size businesses. This is likely to be determined by reference to the Companies Act definition of SMEs, requiring two out of the following three characteristics to be met – turnover (lower than £25m), employees (fewer than 250), and gross assets (lower than £12.5m).
- The Chancellor stated that large businesses will only be eligible for the Job Support Scheme if they are able to demonstrate they have suffered a reduction in revenue since the outset of the COVID-19 pandemic. No details have been published on any thresholds which must be met in order to determine whether large employers are eligible, and the current guidance refers instead of revenue specifically to employers bring able to demonstrate their business has "been adversely affected by COVID-19".
- Businesses who use the Job Support Scheme will be subject to certain important conditions. For instance, no businesses using the scheme will be able to make employees receiving support under the scheme redundant, and large businesses will be restricted from making capital distributions (such as dividends) whilst using the scheme. Employers will have to wait for further guidance to be published on the full extent and scale of the conditions they will be subject to whilst using the scheme.
- Eligible businesses can claim support under the Job Support Scheme and still receive the Job Retention Bonus (a £1,000 grant for each employee who was furloughed under the Job Retention Scheme and remains employed on 31 January 2021, provided certain earning thresholds have been met).
Whilst news of this successor to the Coronavirus Job Retention Scheme will be welcome to many businesses, it does appear that the Chancellor no longer intends to support businesses via a salary protection scheme which are not able to operate at all in the current environment as a result of ongoing government restrictions, including theatres and certain types of hospitality venues (e.g. nightclubs), as employees must work for one-third of their normal hours. Instead, these businesses will need to look to the other measures announced in the Winter Economy Plan for assistance. Unfortunately, the scheme has also come too late for those employees who have become unemployed in the last two months as the furlough scheme started to wind down.
The new rules may mean that employers seek to make redundancies in the coming weeks to ensure that the work which is available is sufficient to provide all remaining employees with work for a minimum of one-third of their usual working hours.
As is now customary, the Job Support Scheme has been announced without much of the detail employers need. It is expected that regulations in the form of another Treasury Direction will be introduced in due course to govern the scheme, and employers will hope this happens in good time before 1 November 2020.
In the coming weeks, employers intending to use the Job Support Scheme should consider writing to all employees who may be affected to explain the impact the Job Support Scheme may have on their working arrangements going forward. As with the furlough scheme, it will be necessary to agree to any changes to an employee's working patterns and their entitlement to salary before implementing the scheme.
Please contact Will Winch, Suresh Patel or Matthew Wood if you would like to discuss the Job Support Scheme in further detail.