U.K.’s Extended Job Scheme Aims to Support Firms, Workers

By Dinah Wisenberg Brin July 2, 2020
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​United Kingdom (U.K.) employers participating in the country's Coronavirus Job Retention Scheme will be able to start bringing furloughed employees back on a part-time basis this summer—one of several key changes under the government's plan to extend the program for four months, through Oct. 31.

The scheme, rolled out early in the COVID-19 crisis, allows businesses hurt by the pandemic to keep furloughed staff on the payroll by taking advantage of government grants covering 80 percent of employee wages, up to 2,500 pounds (approximately $3,072 USD). Chancellor of the Exchequer Rishi Sunak announced the extension in May as part of a plan to ramp up the U.K.'s economy following the country's broad shutdown.

The program had protected 7.5 million workers and nearly 1 million businesses through more than 10 billion pounds (approximately $12.28 billion USD) in claims as of May 12, according to the government. Under the extension, organizations will be able to seek new grants only for employees who were furloughed for at least three straight weeks from March 1 to June 30, although there's an exception for workers returning from family leave.

Bringing Back Furloughed Workers

Starting July 1, employers also will be able to bring back furloughed employees while claiming a government grant to support staff for any hours not worked.

Employers will have to pay 100 percent of wages for the hours the employee works, noted Laura Morrison, an Edinburgh-based attorney with Dentons. The employee is entitled to furlough pay for the remainder of his or her normal working hours, she said.

In addition, the government will ask employers to contribute a percentage toward furloughed workers' wages and reduce its own grant contributions in September and October.

"Our Coronavirus Job Retention Scheme has protected millions of jobs and businesses across the U.K. during the outbreak—and I've been clear that I want to avoid a cliff edge and get people back to work in a measured way," Sunak said when he announced the extra time. "This extension and the changes we are making to the scheme will give flexibility to businesses while protecting the livelihoods of the British people and our future economic prospects."

Morrison explained that furlough pay remains capped at 80 percent of salary or wages up to 2,500 pounds, with the program continuing to fund this compensation and cover both employer National Insurance contributions (NICs) and minimum required employer pension contributions until July 31.

Beginning in August, organizations will be required to pay employer NICs and pension contributions, she noted. In September, they will also have to pay 10 percent of the worker's salary or wages, with the scheme paying 70 percent, and in October, employers must contribute 20 percent, with the government program paying 60 percent.

Can Layoffs Be Avoided?

"While employer contributions will be substantially less than thought, many employers will still need to consider whether they can afford to continue to avoid redundancies while the scheme is in place," Morrison said.

"The chancellor was clear that, as things stand, he will not extend the scheme beyond the end of October.  Sadly, but unsurprisingly, many businesses are gearing up for redundancy exercises as they move to reduce costs. We can trace some of these redundancies directly back to the impact of the pandemic. In other cases, the pandemic has caused businesses to accelerate longer-term transformations."

Being Flexible

Employers will no doubt find the ability to bring employees back to work part time helpful as they plan to reopen workplaces safely, but the process will pose challenges that call for organizations to be flexible to meet workers' needs, Morrison added.

"The majority of employees with children will continue to experience child care difficulties, with schools in many areas of the U.K. closed to most children until the autumn term begins. Even then, we expect to see a blended model of part-time school attendance and home learning for the foreseeable future," she noted.

In both situations, employers need to be as flexible as possible, she added. "They should bear in mind that there is both an employee relations and a public relations angle to the decisions they make. Employees and customers may remember for a long time how an organization dealt with the pandemic and all of the issues it has thrown up. Prospective employees may ask in the future how the organization managed the challenges the pandemic presents."

Tina Chander, an attorney with Wright Hassall LLP in Leamington Spa, England, noted the job retention scheme closed for new entrants on June 30, but in order for employers to claim the grant, the employee had to be placed on furlough on or before June 10.

Nonetheless, Chander added, any employee placed on furlough for at least three weeks between March 1 and June 30 can be furloughed again between July 1 and Oct. 31 under the extended program.

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Family Leave Exemption

Morrison noted an exception that allows for employers to furlough employees returning from family leave after June 10. That cutoff, required in order to meet the three-week-furlough condition by June 30, left employees returning from family leave at higher layoff risk if their employers couldn't place them on furlough, she said.

"Following calls from Maternity Action, a charity that campaigns to end inequality for pregnant women, new mothers and their partners, the Treasury created an exemption for those returning from maternity leave, paternity leave, shared parental leave, adoption leave or parental bereavement leave. The Treasury attached one condition to the exemption: the employer must have previously furloughed other employees" by the June 10 cutoff, Morrison explained.

Dinah Wisenberg Brin is a freelance reporter based in Philadelphia.

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