We are here to support you during
these uncertain and challenging times.

coronavirus job retention scheme – time to plan for the transition

Updated 2 November 2020

NOTE: Since the publication of this article the Government has announced that the Coronavirus Job Retention Scheme will be extended – see Coronavirus Job Retention Scheme Extended

Coronavirus Job Retention Scheme (CJRS) was introduced by the government on 20 March 2020 and provided a lifeline to all businesses that have been impacted by COVID 19 and the restrictions imposed by the government to try and control the spread of the virus.

The CJRS has been extended to the 31 October 2020; on the 29 May the government announced a change to the rules so that as from 1 July 2020 employers can bring back to work employees that have previously been furloughed whilst still being able to claim under the CJRS for their normal hours not worked. Employers must pay employees 100% of wages for the time worked and then can claim under the Scheme for those hours not worked at the 80% rate (subject to cap).

The government also announced that as from 1 August employers will be required to start contributing to the cost of the furloughed employees as follows:

  1. as from 1 August 2020 employers will have to pay for the employer pension and national insurance contributions (for the average claim this represents 5% of the gross employment costs);
  2. from 1 September 2020 employers will also be required to contribute 10% of the furloughed salary, with the state paying 70%;
  3. from 1 October 2020 the employer contribution will increase to 20% of the furloughed salary, with the state paying 60%.

The government has confirmed that the CJRS will close on the 31 October 2020. Full details can be seen in the government’s press release and HMRC factsheet.

The extension of the CJRS provides welcome support to those businesses that have been impacted by the COVID 19 pandemic as it is clear from the government’s  Recovery Strategy  that there will be no quick exit to the lockdown.  Businesses will continue to have to adapt to overcome the new challenges placed upon them which is likely to involve a reduction in work and restrictions on cash flow.

As the timetable is now clear employers should use this time to plan for the transition and consider the following:

Will employees remain furloughed up to 31 October 2020?

Employers should review the current terms of the Furlough Worker Agreement and most likely the terms will have to be reviewed to extend the furlough period.

Employers should write to the furloughed employees to inform them of any changes, including the extension of the furlough period, and obtain their consent.

Does the business wish to introduce a furlough rota system?

The government is actively encouraging employees to return to work if they cannot work from home. It is therefore to consider whether the business has the need and capacity to start gradually bringing employees back to work on a rota system. As from the 1 July employers can bring furloughed employees back to work for any amount of time and any work pattern provided the employees have been previously furloughed for at least 3 consecutive weeks by the 30 June 2020.  This would be a change to the current terms and therefore employees agreement will need to be obtained.

Prior to employees returning to work employers should carry out a risk assessment of the workplace to ensure it is COVID Secure.

Will there be a gradual return to work as from 1 July 2020?

As from 1 July 2020 the rules of the CJRS changed to provide greater flexibility with furloughed workers able to return part-time. Employers will have to pay 100% of wages for time worked but can claim under the CJRS for days not worked.

If the business plans to return employees on a part-time basis then it is to consider if this will apply to all employees or a reduced workforce. This will depend upon the needs of the business and its ability to provide a COVID Secure workplace.

Employers will need to decide carefully who will return to work on a part-time basis and who will remain furloughed. Employment law continues to apply in all cases so employees should be treated and selected fairly and without discrimination.

Again, as a return to work on a part-time basis will be a variation to the Furlough Worker Agreement employers will need to consult and obtain the employees consent in respect of any changes.

What about holiday?

Workers continue to accrue holiday during furlough leave as confirmed in the government’s guidance

Employers may ask workers to take holiday whilst furloughed and the guidance recommends that employers ‘should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so’.

If the worker does not agree, then the employer may serve formal notice of not less than twice the period of time they wish the worker to take as holiday and require the worker to take leave, for example an employer must give 2 weeks notice if they wish their worker to take 1 week’s holiday. However the guidance states that employers should ‘consider whether any restrictions the worker is under, such as the need to socially distance or self isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday’.  It is therefore preferable to obtain agreement rather than having to compel workers to take holiday.

The new government guidance has confirmed that workers should be paid 100% salary for the days taken as holiday whilst on furlough and the employer should ‘top up’ the 80% furlough salary if they are not already doing so. Whilst this means a cost to the employer it does address the issue of workers accruing holiday which they will want to take when this is over or be entitled to be paid if their employment is later terminated.

Note:  the government has introduced temporary legislation which allows employees to carry over their statutory leave (4 weeks) into the 2 leave years immediately following the leave year in respect of which it was due.  However, this is only available if it was not reasonably practicable to take some or all of their 4 weeks basic holiday entitlement as a result of the effects of coronavirus.

What will happen as from 1 November 2020?

The government has confirmed that the CJRS will end on the 31 October 2020 so employers should consider the options available to see if they can reach an agreement now with the employees on how best to face the challenges ahead.

On the 8 July 2020 the Chancellor announced a new job retention bonus as part of its plan to encourage employers to retain its workforce. Employers who bring workers back to work from furlough and retain them until the end of January 2021 will qualify for a £1,000 bonus for each employee. To qualify the worker must earn an average of £520 per month and the bonus will be paid in February 2021.

A number of options are available through consultation and agreement include:

Temporary Pay Reduction

Whilst employees have been on furlough they may have only been paid 80% of their normal salary. It is possible to consult with employees now to agree to a temporary reduction in pay when they return from furlough, for say 3 months, and then for this to be reviewed. This will be a temporary variation to their terms and conditions of employment so must be done with their agreement. If it is forced on the employee then they may have a claim for unlawful deduction from wages and/or constructive dismissal (subject to eligibility).

Short Time Working

Perhaps a more attractive option to a pay reduction for employees is an agreement to temporary short time working. This is when an employee agrees to a temporary reduction in their contractual hours which in turn reduces their pay on a pro-rata basis, so for example, an employer could propose an employee agrees to a 4 day week and in turn are then paid 80% of their salary. Employees may already have returned to work part-time under the new rules of the Scheme so employers may obtain their agreement for this continue once the Scheme ends.

The first step is to see if there is a contractual right to do so. If not, and most contracts do not, then it is to obtain their agreement through consultation.

Employees may be eligible to a guaranteed payment (maximum daily guarantee payment is £30) for ‘workless’ days so you should take advice before beginning this process.

Temporary Lay Off

If a business is struggling in the short term to have sufficient work and/or cash flow to allow employees to return to work after the Scheme ends then another option is to agree with the employee a temporary unpaid lay off. This means that an employee will agree not to work and not be paid for a period of time but remain employed by the business. If at the end of this period redundancies cannot be avoided then, subject to eligibility, the employee would still be entitled to notice pay, accrued holiday pay and statutory redundancy pay at their normal rate of pay.

Again, employees may be eligible to a guaranteed payment (maximum daily guarantee payment is £30) for ‘workless’ days so you should take advice before beginning this process.

Redundancy

Regrettably, it may be that the above steps are not sufficient and a business may have to reduce headcount and make redundancies. For the purposes of an entitlement to a statutory redundancy payment and a fair dismissal an employee is dismissed by reason of redundancy if:

  1. The employer ceases carrying on the business in which the employee worked;
  2. The employer ceases carrying on the business in the place in which the employee worker; or
  3. The business needs fewer people to carry out the work of a particular kind.

Prior to any dismissal an employer should consult with employees; if 20 or more employees are being made redundant in one establishment then it will trigger collective consultation and will require a minimum consultation period of 30 days (45 days where 100 or more  employees are being made redundant).

A failure to carry out a fair consultation process may result in an unfair dismissal claim and a failure to carry out collective consultation may result in a punitive award of 3 months pay for every employee.

Planning and consultation should begin as soon as reasonably practicable if redundancy is an option.   Upon termination employees will be entitled to contractual notice pay, accrued holiday pay and, for those with over 2 years continuous service a statutory redundancy payment

For more information on redundancy click here

Summary

Whilst there is enormous uncertainty with what lies ahead, businesses should use this time wisely and try to plan what will happen over the next few months whilst workers are furloughed and beyond.

If you would like to discuss your plan or have any questions in respect of this then please do contact Paula Stuart on 07887 998799 or Stuart Snelson on 07715 110425 who can explore the options with you and guide you through the process.

The Employment Team

  • Paula Stuart Partner
    Employment 07887 998799
    Paula has over 20 years’ experience practising employment law and provides clear and practical advice to all clients in all aspects of employment matters. Paula also delivers bespoke seminars to clients to meet their specific training needs. Recent courses include ‘The Essentials of Employment Law’ and ‘Best Practice when Managing Redundancies’

    more

  • Stuart Snelson Partner
    Employment 07715 110425
    Stuart is Head of the Employment Department and has over 20 years’ experience advising on all aspects of employment and pensions law.   His partner led service provides practical and commercially focused advice to a wide range of local, national and international clients on the whole range of work related matters.

    more