The Job Support Scheme within the hospitality sector

UPDATE – The Government announced on 31 October that the furlough scheme will be extended from 1 November 2020 until December 2020, in view of the new national lockdown which comes into effect from 5 November to 2 December 2020. As a result the start of the new Job Support Scheme has been postponed until the end of the extended furlough scheme.

The Government has announced the new ‘Job Support Scheme’ which will replace the existing ‘Furlough’ Scheme. The scheme attempts to support “viable” employers who are struggling due to lower demand and the continuing restrictions imposed by the Government. All SMEs are eligible, while certain large businesses (those with more than 250 employees) will be required to show that their business has been adversely affected by COVID-19.

The scheme attempts to support “viable” employers who are struggling due to lower demand and the continuing restrictions imposed by the Government. All SMEs are eligible, while certain large businesses (those with more than 250 employees) will be required to show that their business has been adversely affected by COVID-19.

The scheme will last for 6 months and the Government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand. Employers will continue to pay the wages of staff for the hours they work; however, for the hours not worked, the Government and the employer will each pay one third of their equivalent salary. The employee will forego one third of their salary for those hours not worked.

The grant is only available to employees who work at least 33% of their usual hours and are not on notice for redundancy. It is capped at £697.92 (based on normal salary) per month. The grant will not cover Class 1 employer National Insurance contributions or pensions contributions, which will remain payable by the employer.

How effective will it be to prevent redundancies?

The scheme focuses upon ‘viability’, with the 33% of normal hours threshold adopted as the test of whether a particular job is viable and so justifies support. Therefore, jobs in the worst affected sectors, such as the hospitality industry, remain at risk. Additionally, the scheme has been criticised since it may be more cost-effective for employers to make some redundancies rather than keep all their staff on a part-time basis.

The new support package arrives amidst new restrictions on the hospitality industry, including a 10pm curfew for many establishments. With the economy set to struggle over the coming few months, further dampening demand, it is easy to see why the new scheme is being criticised.

Many employers in the hospitality sector will inevitably be forced to make redundancies or other cost-saving measures.  Those businesses in this position must be careful to ensure the process is done fairly and in accordance with the legal requirements, so as to avoid extra costs arising from challenges to the process or the decisions; these could arise for example if you fail to consult properly where required, or if the selection process is too subjective. Please get in touch if you are considering making redundancies.

For further information or for general employment queries please get in touch with our employment team.