Will the extended furlough scheme be sufficient to stem the tide of redundancies?

4th November 2020

After resisting calls for a ‘circuit breaker’ lockdown, preferring to stick with the local 3 tier approach, Boris Johnson announced on Saturday evening that there will indeed be a national lockdown from 5 November 2020 until 2 December 2020.

The current intention is that, from 3 December, we will revert to the local tiers, but that could, and probably will, change.

Having been extended several times, Rishi Sunak was clear that the Coronavirus Job Retention Scheme (known as the furlough scheme) would end on 31 October 2020. The Government contribution to salary was reduced to 70% in September and then to 60% in October with the employer still having to top up to at least 80% of pay. There is little doubt that the furlough scheme saved hundreds of thousands of jobs.

However, employers remained concerned about the furlough scheme ending. Unfortunately, much of our recent advice to our clients has been how to follow a redundancy process or other options, such as short-time working or salary reductions. There had been some optimism over the summer months but then the second wave hit. Cautious optimism was again replaced by nervousness and fear.

On 24 September 2020, less than 6 weeks before the furlough scheme was due to end, the Chancellor announced the Job Support Scheme (version 1). This required employees to work, and be paid for, 33% of their normal hours. The employer and the Government would then each pay 33% of the unworked hours, with the employee waiving, by agreement, the balance. Our experience from clients was that this was not attractive to employers and redundancy was still the ‘preferred’ way to proceed.

On 22 October 2020, just 9 days before the Prime Minister announced lockdown 2, the Job Support Scheme (version 2) was revealed and in two parts, JSS Open and JSS Closed. JSS Closed would apply where businesses in tier 3 have been forced to close. The Government would contribute 66.6% of pay (capped at £2,083.33). For JSS Open, the employee must work, and be paid for, 20% of their normal hours. The employer then only has to pay 5% of the unworked hours, with the Government paying 61.67% of the unworked hours, equal to 49% of the overall salary, subject to the cap of £1,541.75.

This has been much more attractive to employers. It has still not prevented redundancies where the job will simply not exist, but the purpose was, after all, to support viable jobs. However, where jobs will hopefully exist in the future, employers have been looking at JSS (version 2) to either reduce the number of potential redundancies.

And then, following the lockdown 2 announcement, despite saying it would end, the furlough scheme has been extended until December.

The amount of the grant will mirror levels available in August, so the government will pay 80% of wages up to a cap of £2,500 and employers will pay employer National Insurance Contributions (NICs) and pension contributions only for the hours the employee does not work. Flexible furloughing will be allowed in addition to full-time furloughing. Details available so far can be found here

Whilst this will again be welcomed, and it will inevitably save many jobs that would otherwise have been lost during lockdown 2, the constant changing of policy, categorically ruling out extending the furlough scheme and then extending it, introducing JSS 1 and then, a month later, JSS 2, (which has been postponed until after the furlough scheme has ended), just causes further confusion for employers. It is a very worrying time for both employers and employers.

Employers invest in their staff and want to retain them. Redundancy is usually the last option. The problem is that many employers have already had to use redundancy as a last option, when it may not have been necessary had JSS 2 been announced much earlier or if an announcement about extending furlough leave had not been made just hours before it was due to end.

It is hard enough for businesses to survive at the moment and the constant moving of the goalposts does not help. If your business or organisation is struggling and you need help to understand the Government schemes and your employment law obligations and options, we’re here to help, get in touch.

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