September and October this year see the scaling back of the Coronavirus Job Retention Scheme under which millions of employees have been placed on furlough while the Government issued grants to employers to cover the cost of their wages.
The scheme ends altogether on 31 October and in September and October the amount of the grant being offered by the Government is to be reduced. Under the original scheme the Government paid 80 per cent of a furloughed employee’s wages up to a maximum of £2,500 per month. In August employers became liable to pay National Insurance Contributions and mandatory pension costs for furloughed employees and from 1 September, the scheme will only pay 70% of employees’ wages to a maximum of £2,187.50 per month. From 1 October the scheme will be reduced further so that the government contributes only 60% of wages to a maximum of £1,875.
It is important to note that these grants are made on the basis that the employer continues to pay a furloughed employee at least 80 per cent of wages or £2,500 per month. In other words the employer cannot simply pass on the reduced amount of grant being provided under the scheme but must top it up so that the actual entitlement of a furloughed employee stays the same.
There seems little doubt that the increased costs to employers – and the prospect of the scheme ending altogether – will result in large scale redundancies across the economy. It is worth remembering that a fair dismissal for redundancy requires an employer to engage in meaningful consultation with employees. That means consulting before a final decision is taken and so even if the end of the scheme is still two months away, it is not too early to start that process if employers can already foresee what will need to be done come November.
Find out how we can help. Our partner, Jon Dunkley, heads the Wollens specialist Employment Department. Contact him today for an informal chat, without obligation on 01271 342268 or via email at firstname.lastname@example.org.