The announcement last week by chancellor Rishi Sunak on the implementation of the job support scheme (JSS), coming into effect on 1 November 2020, will be welcomed by employers and employees alike. It will, however, prompt businesses to carefully consider their options.
The coronavirus job retention scheme (CJRS) ends on 31 October and employers that currently have staff on furlough will need to decide whether they will be able to bring them back into the business or, even with the assistance of the JSS, whether they need to make redundancies.
Under the JSS, employees must work at least one-third of their normal working hours and be paid by their employer for those hours. If that key condition is met, for the hours not worked, the government and the employer will each pay one third of an employee’s salary, with the level of government grant (calculated based on an employee’s usual salary) capped at £697.92 per month.
While the promised government guidance will be required to put more flesh on the bones of the scheme, it is clear from the chancellor’s announcement, and the initial government statement issued immediately following it, that employers will be facing a materially higher cost burden under the JSS compared to the CJRS.
Essentially, for an employee working just 33 per cent of their normal hours, their employer will be required to pay 55 per cent of their salary, with the government contributing a further 22 per cent, up to the cap. In contrast, under the CJRS, employers are currently contributing just 10 per cent of salary (rising to 20 per cent in October) – albeit that their employees are not permitted to carry out any work for them while on furlough.
Companies will now need to carry out detailed assessments of their requirements for the six-month period from 1 November and will need to consider whether the reliance on employees who are, essentially, working part time will meet their business needs. For many organisations, particularly those where client and customer relationships are key, the prospect of having a large proportion of staff working part time will not be attractive.
Ultimately, employers will be relying on forecasts for next spring onwards when they make their decision as to whether or not they want to rely on the JSS. If a business is confident that its fortunes will be revived during 2021 and it does not want to lose its people, it may be more inclined to use the scheme.
Conversely, if reliance on the JSS, with the resulting impact of a large number of part-time employees, is not suitable, or if the business is unsure about its future viability, it may be more inclined to consider implementing redundancies. If so, employers that are currently relying on the CJRS will need to take account of the fact that the 45-day consultation period for larger-scale collective redundancies will take them beyond the end of the CJRS – the so-called ‘cliff edge’ has already been passed.
The cost impact for employers does seem to be a fundamental flaw in the JSS. The significant financial burden imposed by the scheme is likely to result in many employers taking the view that they will make redundancies at the end of the CJRS and simply rehire dismissed employees (or hire entirely new recruits) if and when there is a requirement. What seems beyond doubt is that there will be a large pool of potential employees from which to recruit once we move in 2021.
Mark Kaye is a senior associate at Bryan Cave Leighton Paisner