28/09/2020

The new Job Support Scheme

Helena Morrissey Colour

Given that the impact of the covid pandemic is going to be with us for some time to come, it is perhaps not surprising that the government has announced further job support measures to help preserve some jobs when the current job retention (or ‘furlough’) scheme comes to an end.  The emphasis is, however, on some jobs.  By his own admission, Rishi Sunak has stated that he cannot save all jobs, only those that are viable.  Quite how ‘viable’ is to be interpreted or defined remains to be seen.  Government guidance states that the scheme is applicable to those businesses who can keep going over the winter months, but who are facing reduced levels of trade.  It could be difficult for businesses who still have employees fully furloughed at the end of October to demonstrate that those individuals are nevertheless in viable jobs.  In simple terms, however, for those individuals for whom a return to work in November even on considerably reduced hours is not likely, the future is not bright.  This means that this new scheme is of no value to employers in those sectors which have little or no prospects of opening up over the winter months  e.g. conferences and events, sporting venues, nightclubs and parts of the travel industry for example. Individuals unlucky enough to be employed in such businesses will find themselves without any further job protection come November.  This in turn leads to another issue.  The job support scheme is only open to those employees already on the PAYE payroll on or before 23 September 2020.   Businesses can therefore not take advantage of the scheme for new recruits – but actually, would they want to?  The way the scheme works actually makes it more expensive to employ people.

In terms of the mechanics of the scheme, employees must work a minimum of a third of their ‘normal’ hours (and be paid by their employer for those hours).  In terms of the remaining two thirds of their normal hours, the bill for these hours is effectively split three ways-between the employer, the employee (in the sense that their wage is reduced accordingly) and the government (although the government’s contribution is capped at a maximum of £697.92 per month).  What this means, therefore, is that employers are effectively paying 55% of an employee’s wages for 33% of the output (i.e. 33% for the hours actually worked and 22% for the employer’s share of the burden of the unworked hours).  One individual being paid 100%  wage for doing 100% of a job is therefore cheaper than two people each working half of their job (i.e. a full time equivalent) which costs 134% of the normal cost.  Ironically, therefore, these measures could in themselves lead to job losses.

Other points to note is that the scheme is available to small and medium businesses but large businesses will be subject to a  financial assessment and must demonstrate that their turnover has been reduced directly because of covid.  The scheme will run for six months, but the government may increase the minimum hours threshold from 33% to a higher percentage of normal hours after 3 months.  It is possible to rotate employees on and off the scheme, but each claim period must be a minimum of seven days.  It is also worth noting that the scheme cannot be used to support the wages of any employees who has been served notice of redundancy, nor can employees be made redundant during any period that their wages are being supported by the scheme.  Further guidance is expected shortly.  As was the case with the furlough scheme, however, such guidance will no doubt generate further questions. 

It should also be remembered that this scheme is only one of a number of options that businesses should be considering when trying to identify alternatives to redundancy.  Employers could consider offering career breaks, sabbaticals or job shares, for example.  Those businesses with the contractual right to do so, could re-consider ‘normal’ short-time working or lay–off.  Employees may also be willing to voluntarily agree to reduced pay, possibly in return for some other incentive, such as more flexibility over their working patterns perhaps?  What is clear is that flexibility will be at the  heart of any successful  job-saving strategy, both on the part of the employer and the employee.    

Employment Law Solicitors

If you are a business owner or HR Manager and you would like to speak with our employment law team in more detail about ways in which you may be able to avoid redundancies and ways in which you can make your business more flexible going forward, do get in touch.  Equally, if you are looking to make redundancies, it always pays to seek legal advice to help you navigate the common pitfalls. Our friendly employment team is here to help. Call 0345 20 73 72 8 or email info@thursfields.co.uk

Helena Morrissey

Helena Morrissey,

Director, Employment & HR Law

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