Beyond the cliff edge
The government has recently announced 2 schemes to ‘soften ‘ the cliff edge which follows the end of the furlough scheme at the end of October. Both initiatives are an attempt to retain jobs Neither scheme is as generous as the furlough and they are not suitable for every employer. The final guidance is still being worked out and is promised before month end. The basic details of both schemes which can work in parallel are shown below. This is probably not the last bulletin on this subject I trust you will bear with me.
The Job Support Scheme
To qualify Employees need not have been previously furloughed, but they must be on an employer’s PAYE payroll on or before 23 September 2020.
It will open on 1 November 2020 and initially last six months.
For at least the first three months of the Scheme, employees must work at least 33% of their usual hours and their employer needs to pay them as normal for those hours. Subject to the cap below, the employee will also be paid in respect of 2/3rds of any unworked hours – 1/3rd by the Government and 1/3rd by their employer. Therefore, an employee working 33% of their usual hours receives 78% of their normal pay (33.33% + 22.33% from their employer, and 22.33% from the Government). The minimum working hours threshold will be reviewed after the initial three months of the Scheme.
The Government contribution is capped at £697.92 a month. The employer contribution (towards 1/3 of unworked hours) is not capped. However importantly, employers cannot top up their employees’ wages beyond the one third of unworked hours it is required to pay for.
Employers remain responsible for any employer NICs and pension contributions on monies they pay to the employee. It’s not yet clear whether they are also payable in respect of the Government contribution.
Small and medium sized businesses will not be subject to any specific eligibility criteria, but large businesses will have to show that their turnover is lower now than before the impact of COVID-19, by way of a ‘financial assessment test’. No details of this test have yet been revealed.
While using the Scheme, the Government expects that large employers will not be making capital distributions, such as dividend payments or share buybacks. This condition may make large scale redundancies more attractive than the Scheme for such employers.
Employees cannot be made redundant or put on notice of redundancy while their employer is claiming under the Scheme.
It’s not yet clear whether employers can begin collective consultation while claiming under the scheme. Presumably they can, as long as employees are not given notice of redundancy during that time.
Employers must agree the new short-time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request. The particular form of that agreement, if any, has not yet been specified it probably will take the form of an amendment to the employment contract similar to that used during the furlough scheme.
The Job Support Scheme might be a great help for employers who can forecast a healthy spring 2021 and can afford to retain talented staff in the interim. However, employers that need to cut costs now might, understandably, be put off – for example by having to pay out 55% of employees’ wages (plus employers’ NIC and pension contributions) in return for only 33% of the work. Other cost-cutting options including reduced hours and redundancies might, unfortunately, still be the best route for some.
Job retention Bonus
The Job Retention Bonus is available to employers in respect of each employee who (a) has been on furlough at some point; and (b) remains employed, and not under notice, on 31 January 2021.
HMRC will make a payment of £1,000 to the employer for each eligible employee. This is a bonus to the employer, and the employer does not have to pass it over to the employee.
To receive the bonus, the employer must have paid a salary of at least £1,560 to the employee between 6 November 2020 and 5 February 2021 (this is to prevent the employer getting a bonus of £1,000 by keeping, say, a zero hours employee on the books and paying them a trivial amount before 31 January 2021).
A claim for the bonus needs to be presented in a 6 week window between 15 February and 31 March 2021. The Treasury Direction does not specify how the claim is to be made, but further guidance is expected.