HPC Law: Kick Start Scheme & Furlough Changes
HPC Update – July 2020
The Rishi Sunak, the Chancellor of the Exchequer recently announced a new ‘kick start’ scheme with a range of financial incentives for businesses which are designed to help businesses re-build and grow now that restrictions have been lifted.
The incentives are as follows:-
- £1,000 for retaining staff. Must be employed at the end of January and earn at least £520 per month;
- £1,000 for taking on ‘trainees’ aged 16-24 (which is not defined) & wages covered for six months and must be a minimum of 25 hours per week;
- £2,000 per month for six months to create new apprenticeships;
- £1,500 for new apprentices taken on if they are 25 or above;
If we take number 1 above, businesses will have to consider whether it is financially viable to continue to employ staff until the end of January to receive the £1,000 bonus. Therefore, businesses will have to evaluate the cost of keeping staff for that period and whether it would be worthwhile continuing to employ the member of staff.
One of the areas of the economy which has been significantly impacted it the hospitality industry. Now bars, restaurants and hotels are able to re-open they have probably more to consider than other sectors. For example, if a restaurant could previously sit 50 guests but due to social distancing they can only seat 20, they will have to consider reduced capacity, reduced revenue and the likelihood of needing less staff.
However they will have the overheads to consider such as leases, insurance and any employment costs when the furlough scheme changes.
It is difficult to see when the hospitality industry will make a full recovery from the pandemic.
Furlough changes reminder
From 1st July you wee able to ‘flexibly furlough’ staff. So, what does this mean? The Government guidance says the following:-
“From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.”
As businesses start to re-open, they will be considering whether they need staff to return and for how long. It is likely that businesses may not fully re-open and so the Flexible Furlough Scheme allows businesses to bring staff back part time and furlough them part time. So for example, you could ask staff to come back two days a week and then furlough them for the other three days.
The difficulty arises where a business may not know whether they will need staff for two days a week, three days a week etc., so it may be difficult for businesses to plan this.
At the start of the furlough scheme, you will have confirmed to your staff in writing that they were placed on furlough leave and if their pay was reduced to 80%, they will have had to agree to this reduction in writing.
In order to ‘flexibly furlough’ your staff members, you will need a new agreement to ‘part furlough’ your staff and that member of staff must have been furloughed previously to allow them to be ‘flexibly furloughed’ as this is a change to their contractual terms. For example, you may be asking them to now work 2 days a week where they would normally work 5 days a week and take a pay reduction for the remaining 3 days. You will need to give them notice that they will be placed on the new hours and we recommend at least 48 hours’ notice is given and they must agree to these changes.
In terms of the pay aspect, staff members will be paid their full rate for the days they work and their furloughed rate for the days they are furloughed which is usually 80% (although some businesses have been topping up salaries) up to the maximum of £2,500 per month.
Changes to the CJRS
Just a reminder that from 1st August, the CJRS will change as follows:-
For 1st August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
For 1st September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
From 1st October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
Businesses will no doubt be considering their future and whether they need the headcount which they currently have. As such, businesses may be considering the following:-
- Probation reviews / extensions;
- Business restructures / change of roles;
- Reduced working / change of terms & conditions;
Businesses must follow a fair process when considering their restructure. In particular for redundancies, businesses can no longer adopt the ‘last in first out’ rule.
Businesses must take account of protected characteristics when deciding on any of the above and and must ensure that they are not discriminating against anyone who has a protected characteristic. As a reminder, the 9 protected characteristics are:-
- gender reassignment;
- marriage and civil partnership;
- pregnancy and maternity;
- religion or belief;
- sexual orientation.
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