The Coronavirus (Covid-19) outbreak has had a huge impact on all aspects of daily life and UK businesses and the economy have undoubtedly taken a hit.
On March 20th, the government announced that they were bringing in a Coronavirus Job Retention Scheme (CJRS) to help mitigate the impact to businesses and avoid job losses. The CJRS allowed employers to place employees on “furlough” and claim 80% of their monthly salaries (up to £2,500).
The scheme also enabled businesses to deal with newly implemented social distancing measures and the sudden downturn in business (or complete closure in some industries). The furlough scheme is set to run until October, although the changes to the scheme are now coming into effect:
Updates to CJRS
From 1st August, the level of support will begin to taper off each month. In August, the government will continue to pay 80% of wages, however employers will be required to start paying ER NICs and pension contributions.
From 1st September – the government will pay 70% of wages and the Employers will pay ER NICs and pension contributions. Wages must also be topped up by the employer (by 10%) to ensure they receive 80% of their wages (up to £2,500).
From 1st October – the government will pay 60% of wages and the employers will pay ER NICs and pension contributions. Wages must also be topped up by the employer (by 20%) to ensure they receive 80% of their wages (up to £2,500).
The Coronavirus Job Retention Bonus – The Government also announced a bonus scheme to incentivise businesses to retain those staff who were furloughed once the scheme has ended. Businesses will be able to claim a one-off payment of £1,000 for every employee who is continually employed until the end of January 2021.
A number of other measures were brought in to help certain sectors recover such as; the ‘Eat Out to Help Out’ Scheme and reductions in VAT payments for the hospitality sector and a six month stamp duty holiday to help kickstart the housing market.
Redundancies and the furlough scheme
Although the CJRS scheme has been welcomed by business owners across the UK, for some, this help won’t be enough. Some businesses will need to make difficult decisions to cut costs and ultimately reduce staff numbers. The media have already reported major job losses across many industries including; aviation, hospitality and retail.
Before making the decision to make compulsory redundancies, you should always look at other options available (such as offering voluntary redundancies and finding alternative roles within the business – for more guidance on this, head to gov.uk).
HMRC have updated their guidance on making furloughed staff redundant: “Where you must make redundancies, you should do so in accordance with the normal rules. This includes giving a notice period and consulting staff before a final decision is reached. You can continue to claim for a furloughed employee who is serving a statutory notice period, however grants cannot be used to substitute redundancy payments.”
Employees must also be granted their usual rights such as reasonable time off to find new employment and standard notice periods:
- at least one week’s notice if employed between one month and 2 years
- one week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more
As HMRC have stated, the need for consultation periods under employment law hasn’t changed. If an employer is making 20 redundancies, the consultation period will be 30 days. For redundancies of 100+ employees, it’s 90 days. Unfortunately, this does mean that many businesses will have already begun the difficult conversations in preparation for the scheme ending in October.
Employees under the furlough scheme are entitled to usual redundancy pay and any outstanding holiday pay. You can calculate the redundancy pay using the gov.uk calculator, and holiday entitlement here.
Throughout the process, it’s important to consider the logistical issues with furloughed staff and the process of holding redundancy consultations. Due to social distancing measures, it may be more acceptable to hold these meetings over the phone or video call instead.
Should I consider consulting an expert?
We understand that managing redundancies can be a difficult and distressing process, especially when coupled with the Covid-19 outbreak, which is why we urge you to speak with a dedicated HR team.
Our HR team will be able to talk you through the process, help you understand your obligations as an employer and help you avoid any costly mistakes. We’re also on hand to offer help and advice on the other government schemes available such as the business bounce back loans and grants. For more information on the schemes and help available, please head to our Covid-19 Business Support Hub.