Furlough’s end brings major challenges for Aberdeen employers

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by Alison Woods, Aberdeen-based partner and employment law specialist at CMS

With less than a month to go before the end of the UK Government’s Coronavirus Job Retention Scheme (CJRS), many employers in Aberdeen and throughout the country are having to take tough decisions about retaining staff.

The UK has already seen at least 695,000 redundancies since March. In Aberdeen, the oil and gas sector was already facing problems before the Covid–19 outbreak, with an oil price crash and many companies making considerations about decommissioning.

The new Job Support Scheme (JSS), which comes into effect on 1 November for six months, will provide a cushion for some, but not all, employers. Unlike the CJRS, the new initiative will only support what are deemed to be ‘viable’ jobs. For businesses to qualify, their employees will need to work at least one-third of their hours, so it will not help those which are closed or unable to open due to social restrictions.

While the JSS is not as generous as its predecessor, it does have potential to help protect jobs here in Aberdeen, especially within businesses which are innovative and can demonstrate their future viability. For those that qualify, the scheme provides assistance for an employee who works at least one-third of their usual weekly hours. They are paid normally for the period they work and the cost of the hours not worked will be split between the Government, the employer and the employee. The Government will pay a third of hours not worked up to a cap of £697 every month. That means an employee could earn 77% of their wages (where the cap has not been applied.)

The new scheme is opened to all sizes of companies but is primarily aimed at SMEs, a positive for the Aberdeen economy dominated by smaller businesses facing a tough winter. Large businesses will need to prove the impact the virus has had on finances, and will face other limitations in areas such as dividend payments.

The scheme’s critics also claim it will not prevent a lot of redundancies, as the cost of retaining an employee on reduced hours but paying for more hours than they work may act as a disincentive. The fact that it’s cheaper to hire a part time member of staff rather than pay one person 55% of their wages for a third of their time highlights possible shortcomings. However, those employers which do retain people until the end of January have the additional benefit of accessing the Job Retention Bonus of £1,000 provided certain conditions are met. As the JSS is focused on reducing job losses, employees cannot also be put on notice or made redundant whilst their employer is claiming under the scheme.

This development will concentrate employers’ minds on what to do at the end of October. Those considering making redundancies should already be consulting over ways to minimise these, both on a collective basis (if the numbers are over 19) and at individual level. The minimum timeframe for collective consultation is 30 to 45 days before any dismissals, if claims are to be avoided.

For employers who are looking to make redundancies now, and have used the CJRS, they will need to remember it cannot be used as a means of covering statutory redundancy payments. New coronavirus-related legislation introduced in July requires redundancy pay to be based on an employee’s pre-furlough pay. When calculating an average week’s pay, the general position is that employers should use the wages the employee received for their normal working hours pre-furlough.

Under the new rules, furloughed employees being made redundant, who are entitled to the statutory minimum notice period, must receive their full notice pay. Those employees who are contractually entitled to a longer notice period than the statutory minimum can, however, be paid the reduced furlough rate for their notice period in some cases. I would advise caution here as trade unions have opposed employers paying less than full pay for notice periods and effectively taking advantage of this statutory provision.

While it is not designed to save every job, and it certainly won’t come close to that, the JSS should provide a lifeline for some workers when it comes into effect next month. Many employers in Aberdeen and in other parts of the country will face difficult considerations and should tread carefully to avoid legal repercussions.

 

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