It is generally accepted that the Coronavirus Job Retention Scheme has been one of the government’s more successful interventions during this crisis. By allowing businesses to furlough staff and reclaim 80% of their wages through a government grant, many employers have, so far, been able to avoid making mass redundancies and keep afloat.
The success of the scheme is reflected in the figures: as of midnight on 24 May, we are told that the scheme had been used by 1 million employers, protecting around 8.4 million jobs with a total claim value of around £15 billion. With the scheme now extended to the end of October, the cost is expected to be around £80 billion pounds.
We are told that this will be the last extension but the withdrawal is more gradual than many had feared and it seems that the government hopes that the support withdrawal will be mirrored by business recovery.
So, what are the different elements of the extended scheme?
Firstly we have the flexible furloughing scheme, which has been addressed in a separate article. The other main element is the gradual withdrawal of government support mirrored by the increasing contribution by employers towards their workforce costs.
Under the changes, furloughed workers will continue to get at least 80% of pay until the end of October, but, by then, a fifth of their salary will have to be met by their employer.
The current grant level will continue in July, but from August, the level of grant will be slowly tapered – the idea being that this reflects people returning to work. The following table sets out the relevant contributions for each month.
In each month, employers will need to be mindful of the interaction of these contributions with the new flexible furlough scheme. Where an employee is working part time under the flexible furlough scheme, the applicable grant and cap will be reduced in proportion to the hours not worked. So, for example, in September, where an employee remains furloughed for 40% of his usual hours, the employer would be able to claim the grant for up to 40% of the cap for that month (i.e up to £875).
Employers’ next steps
Employers should urgently consider how these changes to the CJRS will affect their businesses, and the practical implications for return to work planning.
Specifically, employers should start to think about whether you are in a position to make the contributions once the government subsidy is reduced. If so, will you be topping up to 100% of salary or 80%? If there is going to be a change (for example, if you are currently topping up to 100%, but with the changes, can only afford to top up to 80%), this is going to need further consultation and engagement with staff, and the obtaining of express consent from employees.
Regrettably, it may also be time to start considering whether, ultimately, you should be retaining your workforce, or starting to take steps to make redundancies. For those employers who may be making a large number of redundancies, you will need to be mindful of “cliff edges” when employers would have had to commence a statutory collective consultation process. These are likely to fall either 30 or 45 days (depending on employee numbers) before either employer contributions commence at the beginning of August or the CJRS ends at the end of October.
What happens next?
Asked if he would "switch the furlough scheme back on" in the case of a second peak in cases and the reintroduction of lockdown measures, the chancellor said the scheme "as it stands in a national way, in the way that it is designed" will end in October. But does this leave scope for the scheme to be introduced in some form in the event of localised lockdowns in the future?
The other area that has been criticised is the lack of a sector specific approach to the amendments. Many would have liked to have seen a higher level of support retained for sectors which may still be barred from doing business, such as hospitality and leisure. There is a real risk for these companies that a sudden increase in staff costs, without the ability to generate revenue, will cause a wave of redundancies and closures. Could it be that the failure to introduce these sector specific measures indicates an intention to gradually reopen those sectors in line with the same timelines?
We await further developments as to how this return to normality will evolve, but for now at least, we have the extended scheme, allowing for flexibility in returning workers on a part time basis, and the gradual increase in employer contribution.