New Jobs Support Scheme announced
The Chancellor introduced the Coronavirus Job Retention Scheme on Friday 20 March 2020. He outlined how it would help employers avoid the need to make mass redundancies due to the anticipated impact of Covid-19. Effectively, it paid employees to stay away from work. It certainly had that effect and helped control the spread of infection. It also massively slowed economic activity.
Businesses in the UK had to wait until 26 March for the Government to issue the first guidance note describing the furlough scheme. Since then, there have been 21 amendments and updates with the last piece of the jigsaw being published on 28 August, some five months later.
To say there has been uncertainty and confusion during this period is an understatement. Legal advice had to be given without sight of any formal regulation until the Chancellor issued a Treasury Direction to HMRC on 15 April which had some significant inconsistencies with the various documents published by HMRC.
Whilst there can be no doubt that the furlough scheme has saved thousands of jobs, the speed with which the Government had to design and publish rules has left many organisations in a constant state of worry that they may not have interpreted the scheme correctly with the consequent threat of having to repay the grant. The uncertainty also seems to have contributed to an environment where the headlines suggest fraudulent claims have been significant.
With the furlough scheme due to be wound up on 31 October, many organisations are either in consultation about making redundancies or are due to start that process shortly. The ONS has suggested around 2.2m people are still on furlough.
If an organisation is going to make redundant 20 people or more within a 90 day period then they have to collectively consult with appropriate representatives for 30 days. If it’s 100 people or more, the consultation period is 45 days. The announcement today of a new job support scheme may just about be early enough to give businesses an opportunity to pause for thought and adjust their strategy regarding likely job cuts planned for the end of October.
The Chancellor suggested the job support scheme will be a replacement for the furlough scheme commencing on 1 November for six months.
The emphasis is on topping up pay for employees who are working a minimum of 33% of their normal hours rather than paying for those who are not working at all. For the hours not worked the Government and employer will pay 1/3 of the wages each. The Treasury suggests that employees working 33% of their hours will receive at least 77% of their pay.
The Chancellor has outlined that the Scheme will work as follows:
From 1 November, for the next six months, the Job Support Scheme will protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19. pic.twitter.com/8NpIKpQV8y
— HM Treasury (@hmtreasury) September 24, 2020
We await further details of the scheme and hope that the Government is in a position to publish clear guidance quickly. Presently the Chancellor has said details will emerge over the next few weeks.
The recent tightening of restrictions and realisation by many that the pandemic is not going to disappear as quickly as it arrived, could well mean that business leaders will not entertain having to deal with the new job support scheme. It may allow some jobs to be saved but many businesses are now thinking longer term about their structure with the prospect that COVID19 will continue to impact on the economy until a reliable vaccine is produced. Employers are not in a position to guess how to implement the new scheme and if there is substantial uncertainty around it in the same way as happened with the furlough scheme, it may not be sufficiently persuasive an option for organisations to delay any potential redundancy decisions.
As soon as the scheme rules are issued we will prepare an update.