From 1 August, employers had to cover the cost of NIC and pension contributions for furloughed workers. From today (1 September), the Government’s contribution towards the CJRS will be reduced to 70% of wages, up to a monthly cap of £2,187.50. This means that the employers who have staff on furlough will need to meet the other 10% of the wage contribution, plus NIC and pension contributions.
At the start of October, the Government’s contribution will be dropped further to 60% of the employee’s wages. The scheme itself will end on 31st October. The Government’s hope is that companies will gradually bring back furloughed employees as workstreams increase after lockdown earlier this year. This also applies to those workers on flexible furlough, and the aim is that workers are brought back to the office as more and more work becomes available again.
The difficulty that employers face though, is the confirmation that the country is now in its deepest ever recession. This means that the work that was present before lockdown might not be there anymore, and once the Government withdraws the CJRS, employers will find themselves with a workforce to pay and maintain, but possibly not enough work.
Employers will now be thinking about potential redundancies. British Airways made press headlines earlier in the year for making a number of staff redundant, even though the option to place them on furlough at the Government’s expense existed at the time.
As the Government withdraws from its CJRS commitment, and as the date for the end of the scheme approaches, the negative press behind redundancies will reduce and the business pressure to make them will increase. One of the likely offshoots of the increasing obligation for business to contribute to furloughed workers’ wages is that employers will begin to consider redundancy exercises.
This, combined with the UK’s exit from the Brexit transition period on 31 December and the roll-out of the Government’s “new points based immigration system” creates uncertainty for businesses who may well decide that they can ill afford to risk accommodating surplus employees where the work that they used to have is either not there, or is at a reduced amount.
Redundancies of 20 or more employees require a collective consultation period of at least 30 days; 45 days for 100 or more. This will mean that employers will be commencing redundancy exercises, so that employees are made redundant before the CJRS scheme ends on 31 October and the employers must once again pay the full salary of their employees.
For guidance and advice on the CJRS, or on redundancy (whether an employee or an employer) please contact Richard Thomas (r.thomas@capitallaw.co.uk) in our Employment and Immigration team to discuss any queries you may have.
