Job retention scheme a “game changer”, says legal expert

Employment law experts have welcomed the latest government measures to pay up to 80 per cent of employees’ wages – describing them as a “game changer”.

John Merry, head of employment at Lanyon Bowdler
John Merry, head of employment at Lanyon Bowdler

The Chancellor has announced a package of temporary measures to support people and businesses in the wake of disruption caused by the Covid-19 outbreak.

This included reference to a Coronavirus Job Retention Scheme which, in basic terms, will cover 80 per cent of payments to employees up to a total of £2,500 per month, back-dated to 1 March – initially for three months, but to be extended “if necessary”.

John Merry, head of employment at Shropshire law firm Lanyon Bowdler, said “As the name suggests, the scheme is aimed at minimising job losses. Whilst full details are awaited, what is clear is that this will be a game changer for many businesses and their employees.

“It might not only prevent future dismissals, but some employers might look to withdraw notices of dismissal that have already been given, or re-engage employees who have already been dismissed.”

The government has stated that all UK employers will be able to access support to continue paying part of the salary for employees who are “furloughed”, and has also described the support as applying to employees who are “otherwise laid off”.

John explained: “The word ‘furlough’ means to allow or force someone to be absent temporarily from work. Colloquially, ‘laid off’ can be taken to mean ‘dismissed’, but in the usual legal sense it means being temporarily required to not work.

“Despite the inconsistency in the terms used by the government, and how they have been used, it’s clear that the scheme is intended to apply to individuals who remain employed but are temporarily not required to work.”

Initial guidance states that to access the scheme, employers will need to designate affected employees as ‘furloughed workers’, notify them of this change, and submit information to HMRC through an online portal, which is intended to be operating by the end of April.

John added: “Within guidance published online, there is a hint that businesses will be able to reclaim 80 per cent of all costs in relation to employees, and not just wages, up to the monthly cap of £2,500, such as in relation to national insurance and pension contributions, medical or life insurance and company cars – but whether this is to be so remains to be seen.

“Also, as yet, there’s no indication as to how the level of pay is to be determined under the scheme for employees with irregular earnings, such as those who work different hours each week.”

The government has said that employers can top up laid off employees’ pay to full pay, but they do not have to. However, the more pertinent point is whether it is open to employers to not pay employees in full.

John said: “The scheme will not provide employers with the automatic right to lay employees off on reduced pay. To do this, there must either be a contractual provision entitling the employer to do so, or else employee consent will be required.

“The reality is that, surely, where employers don’t have a contractual right to lay employees off, most employees will gratefully accept being laid off on 80 per cent of full pay rather than face possible dismissal. But some might not.

“In that event, employers can look to dismiss by reason of redundancy – although a fair procedure must be followed in the case of employees with two or more years’ service, and collective consultation rules can apply where 20 or more employees are affected.”

John said as positive a move as the new scheme was for protecting employees, it might cause some resentment.

He added: “If some employees have to continue working to earn their pay whilst others are getting most of their pay for doing nothing, this might impact on employment relations.

“To address this, some employers who are to furlough only a proportion of their workforce might look to rotate the affected employees to share the ‘benefit’ of being laid off.

“There is no suggestion so far that the scheme will assist businesses or employees in the context of short-time working, that is to say, when an employee’s working hours are temporarily reduced.

“For example, some employees will have had, or will have, their working week reduced, maybe from five days to four, or even down to one. It seems that as such employees are not completely laid off, the government will not provide funds for employers to top their pay up to any extent.

“Again, this might cause employees to feel resentment – particularly if they have colleagues who are laid off altogether on 80 per cent of full pay.

“Employers might therefore want to revise arrangements for short-time working in light of the availability of the Job Retention Scheme. “It remains to be seen, but it might be possible to alternate employees between periods of lay-off and periods of work, and/or to rotate employees who are laid off, to maximise the funding accessible from the scheme and also spread around the workforce the impact of  20 per cent reductions in pay.”

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