Legal

Alternatives to the government’s job retention scheme

27 Mar 2020 By Rachel Collins

Rachel Collins lays out other options for businesses that aren’t able to furlough staff

The government has acknowledged the difficulties facing employers in the wake of coronavirus, and on 20 March the chancellor announced exceptional and targeted measures to assist businesses during this period, with the aim of protecting employees’ jobs and safeguarding businesses.

Support introduced so far includes a job retention scheme – whereby HMRC will reimburse up to 80 per cent of the salaries of employees who may otherwise have been laid off (up to a maximum of £2,500 a month) – as well as the automatic deferral of VAT and income tax payments for all businesses, and the ability for small and medium businesses to reclaim statutory sick pay for sickness absence due to Covid-19.

As their first port of call, employers should carefully consider the wide-ranging support structures put in place by the government before making critical business continuity decisions. However, where such measures will not be workable, there are other options employers can consider in the short term, with a view to effectively bouncing back later this year. 

Annual leave

Employers could explore the option of requiring employees to take annual leave at specified times – for example, taking two weeks of paid holiday during the next 12 weeks. Although this will not reduce overall payroll costs, it would help to ensure that, when the effects of the pandemic begin to subside, employees are available to work. 

Voluntary sabbaticals and career breaks

Another option for employers is the use of voluntary sabbaticals and career breaks. This may be particularly attractive to those employees who, due to the current circumstances, have found themselves now looking after young children at home and will struggle to juggle the demands of both childcare and work. This would assist the business in reducing overall costs but would also provide the employee with the comfort that their continuity of service remains intact. This of course would have to be agreed with employees and it is also important to remember that, in most cases, employees would still be entitled to benefits, including paid holiday. 

Layoffs and short-term working

Those employers who have the contractual right to lay off employees, or place them on short-term working, may wish to explore this route. However, this may only be appropriate where the expected disruption to business will be four weeks or less due to an employee’s right to claim redundancy payments after this period. If employers expect that the disruption may last for a longer period, the government’s job retention scheme, which allows employees to be furloughed for a period of time, would be more appropriate for both employers and employees.

Working hours scheme and redundancies 

Where employers think the economic effects of the pandemic may be a longer-lasting concern, consideration should be given to whether any employees will be made redundant or if there are other options, such as a ‘working hours scheme’. Employers wishing to operate such a scheme would need to gain the consent of employees to agree to a reduction in their working hours (and corresponding pay and possibly benefits) for a period of time, which could then be revoked as the business begins to recover. This could be used as an alternative to a redundancy process, with the benefit to employers of reducing the overall payroll costs, while ensuring employees are able to retain their roles.

If 20 or more staff may be dismissed within a 90-day period, employers should collectively consult with employees and dismissals may only take effect 30 days after collective consultation began. It would, therefore, be wise to begin the consultation process before the business reaches a critical point. Employers should also be aware that they must notify the secretary of state of proposed dismissals in circumstances where they are undertaking collective consultation. 

Returning to business as usual

This pandemic is creating unprecedented levels of business disruption and uncertainty, which is presenting exceptional challenges for employers. Navigating this landscape will present difficult decisions but, to ride out the storm and retain a workforce ready for a return to business as usual, employers should seek to consider all their options before making critical business continuity decisions. Ensuring that employees’ roles are preserved wherever possible will enable businesses to successfully hit the ground running when the pandemic subsides.  

Rachel Collins is an associate at Stevens & Bolton

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