On 24 September 2020, Rishi Sunak announced another support package for small and medium sized businesses, the Job Support Scheme.
The scheme starts on 1 November 2020 and will run for 6 months. It can be used by businesses who did not use the furlough scheme as well as well those who did. The business must have fewer than 250 employees. The scheme will only support jobs which are viable, not employees who are already at risk of redundancy.
Employees must return to work on 33% of their contracted hours. The employer will have to pay 55% of their wages (to avoid the automatic redundancy provisions already legislated for) and the government will then contribute 22%. The government contribution is capped at just under 22% a month.
Why use the Job Support Scheme and not make redundancies?
Firstly, don’t forget the job retention bonus of £1000 due in January for EACH employee who returned from furlough.
Secondly, you may need to keep things ticking over until March next year to see whether your business picks up. The benefit of the scheme is that all employees can return to work on 33% of their hours but to a wage costs of 55% of their wage. If you pay an employee less than 50% of their wage, they will be automatically entitled to be made redundant within a few weeks. This scheme avoids compulsory redundancies.
If you decide to use the new scheme, you still need to confirm this in writing to your employees and we can provide a letter for you do so.
But it’s not all roses around the door for employers. The issues for employers to consider are:
- annual leave will continue to accrue for employees at their usual contracted rate;
- length of service will continue to accrue so redundancies may be more expensive in March than now;
- employers may have more staff with over 2 years service and therefore more complex dismissals to consider in March;
- having more staff working less hours creates issues in terms of: increased infections in the workplace, more handovers and likely issues arising from them, more sickness absence, less client continuity, more annual leave to find cover for.
Employers should think carefully about using the new scheme as an alternative to making redundancies now. Our view is that it is better to rip the plaster off rather than peel it back slowly. If you know that you need to make cuts, employers are able to protect the future viability of their businesses by way of immediate redundancies.
For more information and advice, please get in touch.