Organisations are in desperate need of guidance around the Job Support Scheme in order to make decisions about their future.
According to law firm Fieldfisher, employers are crying out for further information about how the scheme will work in practice to consider whether they can safeguard jobs beyond October.
Its warning was issued shortly before the chancellor revealed that the government would be covering two-thirds of wages for employers legally required to close because of local and national lockdowns.
Firms claiming through the JSS will need to offer employees at least one third of their normal working hours, which Fieldfisher suggested may not be possible in some sectors, such as leisure and entertainment.
It has been a fortnight since the JSS, due to begin on 1 November, was announced by chancellor Rishi Sunak. Yet, little information about how it will work in practice has been published.
“Businesses are desperate to receive this guidance as soon as possible so they can make strategic decisions,” said Alex Watson, an employment lawyer at Fieldfisher.
“We are yet to see how effective these measures will be in practice in safeguarding and securing jobs beyond October 2020 when the current furlough scheme closes and makes clear the financial incentive for employers to utilise the new scheme, especially as it seems that there will be a number of pre-conditions which must be met before employees qualify for the government grant.
“Without this clarification from the government redundancies are still likely in some sectors e.g. hospitality, entertainment and leisure, where there continues to be no or little work.”
Under the JSS, the government will cover 22% of wages for the normal hours not worked by an employee, with the employer paying 55%. Employers must offer staff at least one third of their usual hours at their full rate of pay.
Watson said a number of large employers the law firm has advised over the past two weeks are concerned that the government would increase the minimum proportion of normal hours to be worked to a higher percentage in a few months’ time, and have questioned whether this could be sustained if further coronavirus restrictions are put in place.
But employers’ biggest concern, according to Watson, is whether using the scheme will be affordable for them. Options such as short time working, lay-offs or varied contractual terms could still be seen as the more viable.
“Where there is no requirement for employers to utilise the scheme, legally, there is nothing to prevent an employer instead looking to negotiate reduced working hours with employees or using short time working provisions – so that they only have to pay the employee for the hours actually worked.
“This issue is compounded by the fact that under the terms of the scheme the requirement for employers to pay the one-third additional wage cost of hours not worked means that it is cheaper for employers to employ one full-time employee than two part-time employees – which financially incentivises employers to make redundancies rather than reduce hours of work.”
Yesterday, Labour published a report that unfavourably compared the JSS to schemes in France, Germany and the Netherlands.
It said employers who wanted to bring two staff back for half the working week instead of keeping one employee on full-time faced much higher wage costs in the UK than they would in the three countries.
Shadow chancellor Anneliese Dodds said: “The chancellor should have introduced a job recovery scheme that incentivised employers to keep more staff on. Instead, his JSS makes it more expensive to bring staff back than many other international schemes.
“Viable businesses just need support to cope with the restrictions the government has imposed on them. They pinned their hopes on the chancellor to deliver, but he’s forcing them to flip a coin over who stays and who goes.
“This wasn’t by accident – it was by design. The chancellor’s sink or swim job support scheme is a throwback to the worst days of Thatcher, and just like in the 1980s people on the lowest incomes will pay the highest price.”
However, Watson warned employers not to disregard the JSS too quickly, “A failure to consider the scheme as an alternative means of avoiding a compulsory redundancy may increase the risk of a redundancy process being unfair, and increasing the risk of unfair dismissal (or other relevant claims) from qualifying employees.”