The government’s new job support scheme, announced on 24 September, is designed to support ‘viable jobs’, and as such is much less generous than its predecessor, the job retention scheme. Eligible employers using the scheme to put workers on reduced hours will be required to contribute a third of their lost pay – with the government topping those wages up another third, to a cap of £697.92 a month.
The Treasury has argued that the scheme provides businesses with valuable flexibility, allowing them to change working patterns week by week to meet demand. There is also tangible value in retaining their skilled and experienced employees and preventing costly staff turnover, it has argued.
But this flexibility comes at a cost to employers. So what are the benefits of using the scheme, and when should companies consider it over redundancies? And crucially, why not just save money by reducing workers’ hours without topping up their wages through the scheme? People Management spoke to experts to get their take...
What’s stopping employers from putting workers on reduced hours without using the scheme?
There is nothing to stop businesses from putting workers on reduced hours outside the scheme, Gary Cookson, director of Epic HR, explains. “Employers have always been able to do that if the employee agrees to it, and this is no different,” he says.
The key difference with the job support scheme is that it protects some of the employee’s wages they would have otherwise lost. This does come at a cost to the employer though – while employees stand to benefit from the government topping up their wages, there is a requirement for businesses to also contribute, which they would not have to do if they chose not to use the scheme.
On the face of it, the scheme does not look like a great value proposition for employers, says Guy Pink, HR consultant and former HR director at addiction charity We Are With You. Businesses using the scheme have to contribute a third of an employee’s lost wages. This means if a worker is on a third of their usual hours, the minimum allowed under the scheme, employers will still have to pay more than half their normal wages. “It looks as though this is another short-term stop gap – until the end of April – to help prevent further redundancies now rather than later,” he says.
So what are the potential consequences, legally and reputationally, for putting employees on reduced hours without using the scheme?
If there is an express contractual right to put employees on short-time working or to lay them off, there is very little legally those workers can do, says Barry Ross, director at Crossland Employment Solicitors, save for potentially applying for a redundancy payment.
However, if this is not the case, then it becomes much harder for the employer. In most instances, businesses will have to seek consent from their employees, says Ross. “If that is not granted, then they may look at redundancies or possibly terminating and re-engaging staff on reduced hours, which could result in unfair dismissal claims.”
Ross adds that for a redundancy to be fair employers must always consider alternatives. “On that basis, it is important to have given the scheme consideration to see whether it is a viable alternative to redundancy,” he says. “There is still a large cost to using the scheme and also a requirement to have some work to do, so it may not be practical or financially sound to use it.”
Cookson also warns employers to carefully consider how their decision to use the scheme or not will impact how the business is perceived externally – particularly if redundancies are being considered. “Society would look unfavourably on organisations that could have used this scheme to save jobs, but didn’t do so,” he says. And employers that put workers on reduced hours but choose not to use the scheme to save on costs could also come out looking bad, he warns.
Under what circumstances will the scheme be most cost effective to utilise?
Duncan Brown, independent rewards adviser and researcher, says employers will likely use the scheme mostly to retain experienced and highly skilled staff who will then be ready to carry on working when business picks up once the pandemic dies down (rather than disengaging and even losing them through reducing their hours but not entitling them to wage top-ups through the scheme). Firms need to be aware that the design of the scheme means it may be more cost effective for them to keep on one higher-paid full-time worker on reduced hours rather than two part-time workers, however.
“If you have lots of employees on national living wage and zero-hours contracts, like in cinemas and restaurants, by contrast, then the scheme is unlikely to make much difference – redundancy and rehiring costs will be relatively low,” Brown says, adding: “This is likely to further encourage a gender skew in the redundancies towards women in low-paid jobs in sectors such as hospitality and entertainment.”
Employers may be more inclined to use the job support scheme when they have done the maths and considered different combinations of hours and subsidies available, says Cookson. “It depends on the wage in question, the hours now being worked and more,” he explains. “Then compare that to redundancy costs and the costs of recruiting from scratch when things improve.”