Posted Thursday 1st October 2020
The UK Government’s Furlough scheme comes to an end on 31 October 2020, leaving many employers and employees in an uncertain position. The original Furlough scheme was undoubtedly popular with employers, not least because it was possible to put people onto the Furlough scheme whilst also giving them ample notice of their impending redundancy. For many, this is the final day of the scheme’s operation.
However, with Covid-19 still affecting government policy and the daily lives of both the employed and unemployed, the government has announced a new Job Support scheme to replace the Furlough scheme in an attempt to keep viable businesses running whilst helping to provide job security to the employees of those businesses that are struggling in these challenging times.
The Job Support Scheme will come into force on 1 November 2020 and runs until the end of the financial year in April 2021. The scheme is designed to enable employers to allow employees to work part-time hours, with the cost of the remaining hours not worked split between the government, the employer (through wage support), and the employee (through a reduction in their wage), meaning that the employee will receive a minimum of 77% of their full-time wages. The government’s contribution will be capped at £697.92 a month, which means that those on high wages will likely lose out more. Employers that use the Job Support scheme may also be able to claim the Job Retention Bonus provided that they meet the eligibility criteria.
The scheme is open to small and medium sized enterprises regardless of performance, but large organisations will have to prove that they have suffered detriment because of Covid-19. Further guidance is awaited but large companies will be expected to not make any distributions out of profits during this period or share buybacks if they enter the scheme.
Employees will be required to have been registered on the payroll on or before 23 September 2020. This means those previously on the Furlough scheme who have been made redundant cannot be transferred to the new scheme. For the first three months the employee will also have to work a minimum of 33% of their usual contractual hours to be eligible to be enrolled on the scheme.
Employers will be required to pay the employee the total amount that they are eligible to receive under the scheme. If the employee works 33% of their hours, then the employer will pay 77% of their usual wages making any deductions required by law.
The Employer will then be able to submit claims to the government through the Gov.uk website to claim back the portion of the payment that will be covered by the government under the scheme from December 2020. The grant will not cover Class 1 employer NICs or pension contributions, employers will be responsible for these sums due.
HMRC will, under the scheme, have powers to investigate fraudulent activity to avoid some of the issues that arose under the Furlough scheme, and employers may have to pay back any monies received and could face fines for contravention of the rules.
Some employers may still be struggling, especially in sectors such as hospitality and tourism. The employer’s contributions under the new scheme are significantly higher than under the Furlough scheme, and by not being able to keep employees on the scheme to wait and see how things pan out, employers may simply decide to make redundancies now rather than make contributions only to face difficulties later. If the upturn in retail and other sectors stays robust despite recent stricter Covid-19 regulations, then employers may well keep employees on by using the new scheme. The Job Support scheme may give employees peace of mind that if the business they work for is still viable, that they will remain in employment, albeit on reduced hours with a view to returning to normality in the future.
This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.