25th September, 2020
Coronavirus Job Retention Scheme Changes
The Coronavirus Job Retention Scheme (CJRS), a scheme put in place by the Government in response to the COVID-19 pandemic, was originally only intended to be in place from 1 March 2020 for three months.
The Government extended the scheme by an additional month on 17 April 2020, and further extended it on 12 May 2020 to the end of October 2020.
On 29 May 2020, the Chancellor announced a number of changes to the CJRS to take place in stages, winding down the Government’s contributions under the scheme.
From August 2020, employers were required to pay employees National Insurance and pension contributions whilst on furlough pay, which they had not been required to previously.
From September 2020, employers were required to contribute a further 10% of employees’ furlough pay, capped at £312.50 per month. The government’s contribution reduced from 80% to 70% of employees’ furlough pay, capped at £2187.50 per month.
As of 1 October 2020, employers will be required to pay 20% of employees’ furlough pay, capped at £625.00 per month, with the Government’s contribution decreasing to 60% of employees’ furlough pay, capped at £1,875.00 per month.
Given that since 1 July 2020, furloughed workers on the CJRS have been able to return to work part-time and employers have been able to claim furlough pay on a pro-rata basis, the new caps are proportionate to the hours worked.
NEW Coronavirus Job Support Scheme
On 24 September 2020, the Chancellor announced a new scheme to replace the CJRS, the Coronavirus Job Support Scheme (CJSS). This will come into effect from 1 November 2020 and will run for 6 months. It will differ from the CJRS in a number of ways.
Employers will need to first prove that the employee’s job is ‘viable’. This will be achieved by the employer offering at least a third (33%) of the employee’s normal working hours for the first 3 months. These hours must be paid by the employer at 100% of the employee’s hourly wage. The Government and employer will then ‘top up’ the employee’s wage by two-thirds of the hours not worked (equating to the employee receiving a minimum of 77% of their full salary, subject to the cap set out below). After the first 3 months, it is expected that, like the CJRS, the Government shall begin to ‘wind down’ the scheme and require more input from the employer, reducing the cost to the treasury.
The Government grant at this stage will be capped at £697.92 and will not cover PAYE and NI contributions – these remain payable by the employer. In addition, the employee shall need to be on the employer’s PAYE payroll on or before 23 September 2020 to qualify for the scheme.
A further point to note is that, unlike the part time furlough allowance currently in effect, it is not a requirement that employees must have been placed on furlough prior to 10 June 2020 to claim under this scheme. It is open to all small and medium companies. Large companies (250 employees or more) who wish to utilise the CJSS will have to meet a financial assessment test demonstrating that they have a lower turnover, due to the impact of Coronavirus.
Employees will be able to cycle on and off the scheme. They do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days. Crucially, employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.
It is important that any employers wishing to use these measures put in place appropriate agreements with their staff to implement the contractual changes as a result of the scheme.
What do employers need to do now?
It is essential that employers plan appropriately to ensure that they are able to cover the payments they are responsible for making in relation to furlough pay during October and consider whether they can utilise the new CJSS from 1 November 2020. Employers should also establish whether they can bring employees fully back to work and make full salary payments from 1 November 2020 once the furlough scheme ends and should consider options available to them at an early stage.
It is anticipated that whilst the CJSS will be a welcome alternative to some businesses, there will still be many businesses affected by the end of the furlough scheme.
On 15 September 2020, the Office for National Statistics released the redundancy rate for May to July 2020, being 5.6 per 1,000 employees, with a total of 695,000 jobs being cut since March. Unsurprisingly, this shows an increase in redundancy rates and things are set to worsen, according to an analysis by the Institute for Employment Studies, which warns that job losses could exceed 700,000 in the coming months; these figures however may now be tempered by the new scheme.
At Aaron & Partners, we have advised on many redundancies and restructure processes recently, however if the new support scheme cannot be utilised, we can also advise on potential ways to avoid redundancies including, for example, short-time working and temporary lay-offs, reduction in hours, as well as exploring temporary and permanent changes to pay, benefits and bonus.
Whilst this is a challenging time for employers and employees both financially and otherwise, it may be that agreement to temporary changes can be sought as an alternative to employers taking more drastic and permanent measures, such as redundancies. It is however essential that any proposed changes are carried out following fair and proper procedures and we would strongly recommend employers take advice prior to making any changes to employee’s terms and conditions of employment.
- Consider the new Job Support Scheme and whether it is a viable option for your business and the employees you have.
- Plan early – it is important that fair procedures are followed and employers allow time for any planned contractual changes, restructures or redundancies.
- Before proceeding with redundancies consider whether part time working or temporary lay offs may suit your business better if you expect business to increase in the coming months.
If you require any advice relating to the Coronavirus Job Retention Scheme, the new Job Support Scheme, redundancy procedures, alternative options or any other Employment Law related issue, please contact Debbie Coyne.
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