Job retention scheme could create resentment among staff still working, experts warn

23 Mar 2020 By Francis Churchill

Questions also raised around how unscrupulous firms will be stopped from gaming the system, as government announces plan to pay employees facing redundancy 80 per cent of wages 

The government has said it will pay the majority of the wages of staff who face being made redundant because of the coronavirus outbreak, as part of a package of measures to protect jobs.

On Friday (20 March), Rishi Sunak, the chancellor of the exchequer (pictured), said as part of the new Coronavirus Job Retention Scheme employers would be able to secure grants from HMRC to cover 80 per cent of the wages of staff who were on the payroll but not working because of the outbreak. This would be up to a maximum of £2,500 per worker per month.

Sunak added that employers were welcome to “top up salaries further if they choose to”.

The grants will be available to all employers regardless of size, and charities and non-profit organisations will also be able to apply. They can be backdated to 1 March and will initially be available for three months, although the government has said it will extend the scheme if necessary.

The launch of the scheme comes as prime minister Boris Johnson escalated social distancing measures, bringing in new rules to close bars, restaurants and other venues for the foreseeable future. While venues selling food to take away are still permitted, many big chains including McDonalds have announced they will be closing stores completely because of the risk to staff.

Many high street shops not covered by the current ban have also said they are taking the decision to close stores.

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Paul Seath, partner at Bates Wells, said the Job Retention Scheme was “extremely welcome and will undoubtedly save many jobs”. But he said it was still unclear exactly how it would operate. “What we do know is that the scheme is aimed at preserving the jobs of employees who would otherwise be made redundant,” he said.

Under the current laws, unless they have specific layoff clauses written into their contracts, businesses that temporarily lay off staff are required to continue paying them in full unless a voluntary agreement is reached. 

However, Seath warned that employers could face some issues with the scheme, including resentment from staff who are asked to continue working but who might have preferred to be among those given time off at a reduced rate of pay.

He also questioned whether there would be “sufficient controls in place to ensure that employers do not claim to have furloughed staff, and so claim the wages, when in fact those staff continue working”.

Peter Cheese, chief executive of the CIPD, raised concerns about how quickly the funds would be made available. Welcoming the scheme, Cheese said: “The challenge now is the speed with which employers can access these funds to avoid redundancies being made, given it could be the end of April before they become available.

“Employers need to hold their nerve in this challenging time and make every effort where they can to retain their staff while waiting for the job retention funding to come through. Concerns over immediate cash flow and payroll challenges should be met by the business loans announced by government, which should be available in a matter of days.” 

The Job Retention Scheme was also welcomed by Torsten Bell, chief executive of the Resolution Foundation. He noted that lower-paid workers were most at risk of losing their jobs. The foundation estimated the cost of the scheme could be £4.2bn. 

“While this scheme will take time to put in place, employers have now had the commitment from the chancellor that wages will be paid and should do their bit by holding off laying off staff,” he said.

In his speech on Friday (20 March), Sunak also announced further measures to help businesses – including deferring VAT payments and extending the interest-free period available to the previously announced Coronavirus Business Interruption Loan Scheme.

The chancellor also announced an extension of the support available for the self employed. However, the Independent Workers’ Union of Great Britain – which represents gig workers – has said it is still unhappy at the disparity of support available to the self employed compared to employees. Under the extended Universal Credit scheme, the self employed are only entitled to £94.25 a week. The union has said it will take legal action, petitioning the High Court for a judicial review.

A survey by the RSA, released over the weekend, found that 47 per cent of the self employed and 51 per cent of those in ‘atypical’ work, such as on zero-hours contracts, would feel obliged to work even if they had coronavirus.

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