Posted: 21/10/2020

Complicated job support scheme could create cash flow issues for indies

Complicated job support scheme could create cash flow issues for indies

An employment law expert has warned fine food businesses to think twice before deciding on staffing levels this autumn – saying they need to be “good at maths” and digest “a lot of rules” laid down by ministers.

Kirsty Rogers, employment partner at global legal firm DWF, said that firms in the sector should be careful before deciding to use the UK government’s latest staff support schemes.

Chancellor Rishi Sunak will bring in the Job Support Scheme to replace the furlough initiative from November. This will effectively see the government, the employer and the employee share the cost of unworked time where at least a third of pre-pandemic hours are worked.

But, Rogers said: “The employer pays 55 per cent of the wages for someone working 33 per cent of their usual hours,” she said. “It’s not brilliant.”

She added that employers would initially pay the government’s share to the employee, only receiving compensation in the New Year, so it could cause cash flow issues. 

And the scheme is only available to staff on a company’s pay system before 23rd September – so anyone let go during the pandemic can’t be brought back now on this arrangement.

Alternatives exist, though, according to Rogers. “You could make someone redundant on the basis that the need for a full-time employee is not there. You should offer them a suitable alternative, which could be one third of their hours. And you can say you can’t afford the government scheme.”

Meanwhile the Treasury will pay a Job Retention Bonus to employers for bringing staff back from furlough and paying them an average of at least £520 per month to the end of January.

Deciding whether to make a redundancy or use one or both of the latest initiatives comes down to a fine balance of costs and benefits, said Rogers.

“Using the schemes can retain skills and allow flexibility to bring people’s hours back up at Christmas. It also depends on the cost of making someone redundant – if someone has long service and a long notice period then that can be costly. 

“You have got to be good at maths. It is worth asking an accountant or payroll expert to review this as it isn’t easy.”

Indeed, even the lawyers are struggling to keep up with the fast-changing situation.

“A lot of problems have arisen because we found out about schemes through announcements on the television,” said Rogers. “And then we’ve heard about changes through tweets from the Treasury.

“We are still awaiting final guidance on the Job Support Scheme.” 

The chancellor has since announced that businesses forced to close due to local lockdowns will recieve support up to 80% of employees wages – akin to the government’s original furlough scheme.

Read the latest edition of Fine Food Digest here.

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