Legal

What does the job retention scheme extension mean for employers?

10 Nov 2020 By Mark Kaye

Mark Kaye explains key considerations for firms following the government’s announcement, including rehiring and furloughing workers

In a clear sign of the times, just days after extending the coronavirus job retention scheme (CJRS) until 2 December 2020, the government further extended it until 31 March 2021.

What are the key terms of the CJRS?

Employees will receive 80 per cent of their current salary for hours not worked, up to a maximum of £2,500 per month. Employers will only have to bear the cost of national insurance and employer pension contributions. This reflects the government’s more generous contribution when the scheme originally began to taper off.

However, businesses should remain cautious – there will be a government review in January 2021 and it is possible (depending on the general state of the economy and the prevalence of the virus) that the 80 per cent government grant will again be reduced.

Rehiring and furloughing – will it work in practice?

In a step that reflects the position that it took when the CJRS was launched, the government has confirmed that employees who were employed and on the payroll on 23 September 2020 and who were made redundant or stopped working for their employer afterwards can be re-employed and furloughed. The employer must have made a PAYE real time information submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees. 

In a bid to avoid mass unemployment and economic scarring, the government is essentially seeking to resurrect jobs that have already been lost. The big question is whether or not employers will be enticed to rely upon the ability to re-employ and then furlough their former employees. 

While some employers may take the view that it is an option worth pursuing, it seems likely that many will be reluctant to do so. The anticipated reduction in the government’s CJRS grant during February and March 2021 and the possibility that employers will have to go through redundancy dismissals following the end of the furlough scheme (which entail an inevitable legal and commercial risk) is likely to dissuade a large number of organisations. 

Furlough or dismiss?

As long as the eligibility criteria is met, all employees, including those on zero-hours contracts, can be furloughed. Although the cost to an employer for furloughed employees (assuming that that it does not have to top up the government grant) is relatively low, it is likely that many employers will now need to make longer-term strategic decisions.

It is perfectly possible for an employer to make employees redundant, rather than placing them on furlough. Indeed, if there is little prospect of a particular role existing when the CJRS ends, there seems to be some merit in dismissing at this stage. 

Clearly, in relation to those employees who have two years or more of continuous service, care should be taken to ensure that the dismissals are carried out fairly. In addition, in all cases, businesses will need to ensure that such dismissals are not discriminatory. 

For those employees on zero-hours contracts, it is unlikely that they will have the continuous service required to have unfair dismissal rights and, if they are not furloughed, it is likely that most employers will simply not provide such employees with any hours.

What next?

Employers will have to make swift assessments and projections before deciding whether to furlough staff, particularly those who are currently subject to redundancy consultation. In addition, they will need to consider whether it is feasible to re-employ dismissed workers in order to furlough them. These are difficult and finely balanced decisions for HR professionals and businesses. 

Mark Kaye is an employment lawyer at Bryan Cave Leighton Paisner 

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