The Chancellor, Rishi Sunak, announced today that the Coronavirus Job Retention Scheme (the Furlough Scheme) will end as planned on 31 October 2020. However, he has provided some much needed relief for employers who have been hard hit by the Coronavirus in announcing the Government's new initiative to support struggling employers, the Job Support Scheme (the Support Scheme). The stated aim of the Support Scheme is to support viable businesses to retain viable jobs in what will undoubtedly be a continued period of significant economic uncertainty.

The Chancellor was clear that the reason for ending the Furlough Scheme rather than extending it further is that, in the Government's view, it is wrong to support people in jobs that only exist because of the Furlough Scheme. Instead, the Government's stated aim is to target its assistance to areas where it can do the most good, namely, in supporting people back to work in viable jobs which provide genuine security.

It is not clear at this stage what "viable" jobs mean or how this will be defined, however it seems that the purpose of the Support Scheme is to keep people in work on shorter hours rather than making them redundant. From what we know now, the key terms of the Support Scheme are as follows:

  1. It will be open to all employers, even if they have not previously used the Furlough Scheme;
  2. Employees will be required to work at least one third of their normal hours and be paid by their employer as normal for those hours;
  3. The Government (together with the employer) will top up some of the shortfall. HM Treasury's tweet, which followed the Chancellor's announcement, has stated that in relation to the remaining hours not worked, the Government and the employer will pay a third of the employee's wages each, meaning that employees working 33% of the hours will receive at least 77% of their pay. All businesses will be eligible to participate in the Support Scheme, however, larger businesses (undefined so far) will only remain eligible if they can show that their turnover has fallen during the Coronavirus crisis;
  4. There will also be restrictions on businesses distributing capital to shareholders whilst they are in receipt of money from the Support Scheme;
  5. Employers will not be able to make those employees who are on the Support Scheme redundant throughout its duration;
  6. Employers retaining furloughed staff on shorter hours can claim via the Support Scheme as well as the Job Retention Bonus;
  7. The Support Scheme will run for six months from November; and
  8. The practical details will be worked out with businesses and Unions over the next few weeks.

What next?

Although this will undoubtedly be welcome news for many employers, given that the detailed guidance is yet to be published, a number of unanswered questions remain. For example, what does this mean for employers who have already commenced redundancy processes and who have to make decisions before the Support Scheme comes into force? Will this undermine the business case to make redundancies for some employers which are already underway? Possibly, although many employers may choose to proceed to make redundancies and retain a smaller number of full-time employees rather than retaining a larger part-time workforce. However, the fairness of such decisions is more likely to be challenged in light of today's announcement and it is key to note that employers are being urged to consider all alternatives before taking the decision to make redundancies as the recent joint announcement made by the TUC, CBI and ACAS illustrates. Now more than ever, it is important to have good clear reasons for any reduction in headcount.

For those larger employers who may not have resorted to using the Furlough Scheme to date, there are clearly going to be evidential requirements to reveal the financial impact of the Coronavirus on their businesses. Some larger employers may be reluctant to share in such a public and closely scrutinised forum.

Whether the Support Scheme will provide enough support for employers hard hit by the Coronavirus remains to be seen. That said, many employers may take this as an opportunity to think creatively about the options available to ease the impact of cost-cutting measures and our team is at hand to help with these decisions.

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