New measures to protect jobs are more complex than the current furlough arrangements, reports Marie Hoolihan
On 24 September, UK chancellor Rishi Sunak announced a new Job Support Scheme (JSS) in which the UK government will top up the pay of employees working reduced hours due to the Covid-19 pandemic.
The initiative was a boost to the many businesses looking for further government support during the pandemic, especially as the government’s Coronavirus Job Retention Scheme (also known as the Furlough Scheme) is due to finish on 31 October. With the winding down of the Furlough Scheme, employers were faced with the difficult decision of bringing employees fully back on the payroll by the end of October or making them redundant. The JSS will replace the Furlough Scheme from 1 November 2020 and will run for six months until the end of April 2021.
The JSS provides employers with the option of retaining employees on reduced hours while still providing some form of pay for hours not worked. This will be particularly welcome news for the near three million workers who remain on furlough and those in hospitality who have had to reduce their hours in light of the 10.00pm curfew on pubs and restaurants.
Full guidance on JSS is not yet available and much remains unclear, and while the news has been well-received, employers will need to swiftly prepare for the scheme in order to make full use of it from the start of next month. Firstly, employers need to be familiar with the criteria for applying JSS.
How will the new scheme work?
- Employees must work at least a third of their normal hours to qualify.
- Employees will be paid by their employer at their regular rates for the hours they work (not the 80% furlough rate).
- The cost of the hours not worked will be shared between the government, the employer and the employee (through a wage reduction). Both the government and the employer will pay the employee a third of the hours not worked.
- The government’s contribution will be capped at £697.92 per month.
- All UK small and medium sized businesses will be eligible, but larger businesses will need to meet a financial assessment test to show their turnover has decreased. The relevant thresholds have not been announced.
Unlike the Furlough Scheme, the grant will not cover employer national insurance or pension contributions.
Renegotiation of employment contracts
In order to implement the JSS successfully, there are a number of important steps that employers need to consider. For instance, employers must agree the new short-time working arrangements with their staff. Any agreement must be in writing and made available to HMRC on request.
Employers who wish to access the scheme in November will need to move swiftly. It is going to take some time to get employees to agree to amend their employment terms to part-time status. Unlike the Furlough Scheme where workers could retrospectively be designated as furloughed if no work had been undertaken, employees must agree to the new part-time hours before they will qualify for the JSS. An employer will not be able to claim the grant in respect of employees working full-time in early November.
There is much more to be considered, negotiated and agreed with staff than when implementing the Furlough Scheme. Furloughed employees were unable to do any work and received a flat 80% of their pay (or 100% with a top-up from their employer). The JSS requires more complicated costs analyses of whether to participate in the scheme or make redundancies and/or how many part-time positions to have. Staff will no doubt want to be consulted on this.
There are additional complexities around how to split the work between staff and agree new working patterns. Some arrangements may also require a change in duties or reporting lines. Short-time working agreements should state any variations to the employment contract or employee’s role, the agreed length of the arrangement and when it will be reviewed. The agreement should address what will happen to holiday accrual. It is unclear whether employees on the JSS will accrue holiday based on their full-time hours (as was provided for in the Furlough Scheme) or accrue holiday on a pro-rated basis.
Importantly, it appears that employers will not be able to top up employees’ pay for unworked hours beyond the one third. The government factsheet states an “expectation” that employers cannot top up wages at their own expense. It is not clear whether employers will be legally barred from doing so or whether the expectation is that employers who access the scheme cannot afford top ups. It was comparatively straightforward to agree furlough leave by way of a top-up.
Individual or collective consultation?
If trade unions are recognised or you have an elected employee body, consultation will likely be required as to the extent to which the JSS will be used. Such bodies may facilitate individual agreements if agreeable to the proposed changes.
Collective consultation will be required if:
- Twenty or more redundancies are being proposed “at one establishment” as the alternative to the JSS; or you are proposing to dismiss 20 or more employees and re-engage them on new part-time terms unless they agree.
- If collective consultation is required, the process will take a minimum of 30 or 45 days (dependent upon numbers). The secretary of state must also be notified of the proposal at least 30 days before the first dismissal if the employer is proposing to dismiss between 20 and 99 employees, or at least 45 days before the first dismissal if proposing to dismiss 100 or more employees.
- If agreement is sought before the employer has formulated a proposal to dismiss 20 or more employees, collective consultation obligations will not apply.
What do employers need to do now?
While the full details of the scheme are unclear, employers need to start thinking about:
- Whether they are likely to qualify for the scheme and if so, whether they will make use of it?
- What work is likely to be available over the coming months and how will this be shared? Will employees “share the pain” or would the company prefer to retain fewer staff full-time?
- Which staff will be offered access to the scheme and on what selection criteria?
- The costs of participating in the JSS versus redundancies.
- Will collective consultation be required?
These preparatory analyses and decisions will equip employers to be ready to access the scheme as soon as possible.
Marie Hoolihan is a London-based employment associate at King & Spalding
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