What the Winter Economy Plan means for employers

In September 2020, it was estimated that there are currently 9.6 million people on furlough from 1.2 million different employers. The government has now announced a package of new economic measures as part of the Winter Economy Plan.

Many feared that the end of the furlough scheme would mean that employees face a cliff edge as of 31 October and for many businesses its successor the Job Support Scheme (“JSS”) is not seen as a game-changer, with the resultant effect being a whole wade of redundancies. However, the Chancellor has since announced the Job Support Expansion Scheme (“JSES”), which provides financial support for the wage costs for businesses legally required to close as a direct result of coronavirus restrictions. This may provide a lifeline for some businesses operating within the hospitality sector.

Unlike furlough, employees cannot be under redundancy notice or served with notice while in receipt of either the JSS or the JSES. However, some may say that the schemes are somewhat belated as significant redundancies have already been made and/or notice has been served to coincide with the end of the furlough scheme on 31 October 2020. Experience shows us that employers who had initiated a redundancy process would have, as part of that process, considered alternatives to redundancy such as pay reductions, retraining and part-time working.

A summary of the applicable schemes:

Job Support Scheme

The JSS requires that for the first three months of the scheme, the employee must work at least 33% of their usual hours (thereafter the government will consider whether to increase the minimum hours threshold), the costs of which must be borne by the employer. Then, for every hour not worked the employer and the government will each pay one-third of the employee’s usual pay. The government’s contribution is capped at £697.92 per month. The grant will not cover Class 1 employer NICs or pension contributions; these remain payable by the employer.

While we await further guidance, we know that employers are not compelled to utilise the JSS and it is only open to those employers who continue to have “viable” jobs (yet to be defined) during the pandemic. Even for employers who arguably continue to have “viable” roles, the requirement to match the government subsidiary is viewed as prohibitive.

Many employers do not view the JSS as a workable scheme but there may, however, be reasons why some employers may look to make use of it. For example, it may assist in helping to reward and retain key talent and skills and/or help to maintain morale, during these precarious times. We envisage that it may also be a cheaper option than the outlay of redundancies for long-serving employees, which would require employers to pay employees with two or more years’ service statutory redundancy payments calculated with reference to age, length of service, weekly earnings (capped at £538) and a fixed multiplier.

Job Support Expansion Scheme 

For many working in the entertainment and leisure industries with continuing coronavirus restrictions, the JSES will provide support as employers simply will not have the funds in place to continue to pay wages on a forced shut-down. The JSES provides employees affected by a forced closure two-thirds of their wages, capped at £2,100 per month, for the time that employees are unable to work. The closure must be for seven days or more.

However, the current government factsheet confirms that the scheme will only cover businesses that, as a result of restrictions set by one or more of the four governments in the UK, are legally required to close their premises. This includes premises restricted to delivery or take-away services. But it is important to note that businesses required to close as a result of specific workplace outbreaks by local public health authorities are not eligible for the JSES.

Job Retention Bonus

The Job Retention Bonus allows employers to claim £1,000 for each eligible employer. For an employee to be eligible, the employee must have been previously part of the furlough scheme and remain employed, and not under a redundancy notice, on 31 January 2021.

A degree of number-crunching will need to be carried out in order to assess whether the schemes highlighted above provide a viable alternative to redundancies. Many employers working within the hospitality sector, and affected by compelled closures, are of the view that the measures do not go far enough. In addition, at the time of writing the government has not announced any further protection for the self-employed.

If you have any questions on the schemes outlined in the article, please contact our employment law specialists Asha Kumar, Angharad Harris and Nathan Donaldson.