employment law 2020

Impact of Laws for Employees to Take Effect this November 2020

It has been a turbulent year for employees and consumers for most of 2020, but as the year ends it still seems far before a return to normalcy. The most important concern for the government is maintaining levels of employment so that the economy does not contract into a full recession once restrictions have been lifted. People as consumers and producers drive economic activity.

  • The Coronavirus Job Retention (Furlough) Scheme is to be extended until March 2021

The Job Retention Scheme has been in force for several months now as a measure for employers to retain employees even as demand shrinks. People on furlough were up 80% of their wages up to £2500 a month due to reduced need for active employees, though in some areas this was reduced to 60% as the economy reopened. This was considered a far better alternative to bankruptcy, firing people, mass redundancy and unemployment, and then having to deal with the chaos of having to re-hire workers once restrictions lift and consumers are ready to engage in their normal buying behaviors.

Keeping as many people employed and engaging in economic activity through the pandemic has already helped to keep the economy going, keeping as many people as possible well-fed and housed and comfortable, and thus preventing panic buying, hoarding, and unrest. Had drastic measures not been taken, the UK it was estimated to face unemployment levels not seen since the 1930s.

The Good:

  • Since most workers and businesses by now are familiar with how the Furlough scheme works, four more months of this at least means less new paperwork and less confusion about new rules and times. Anyone working in a full time job (or on a PAYE basis) on October 30 may be furloughed. This includes people on zero hours contracts or those working flexibly.
  • Recent months had the share paid by the government decreased to 60% while the employer pays 40%, but during the extension will return back to 80%.
  • Employers can put on furlough those employees that are shielding according to coronavirus guidelines or have additional responsibilities with regards to coronavirus, including taking care of children.
  • Employees on the payroll on September 23 but were made redundant or stopped working afterwards may be reemployed and claimed for.
  • Its replacement, the Job Support Scheme, is significantly less generous – only paying up to two-quarters of an employee’s income up to £1541 a month. Employees must participate in at least 20% of their regular working hours to qualify.

The Bad:

  • People on full-time furlough are not allowed to work, as noted: 

    “… during hours which employees are recorded as being on furlough, they cannot do any work for their employer that makes money or provides services for their employer or any organisation linked or associated with their employer.” 

    Many people would still rather be working instead of being paid to sit around, and some are on a flexible furlough working hours.Some of those on furlough are not confident that they will still be retained by their company after their furlough ends, which is why the government had set up the Job Retention Bonus of £1000 for every person they brought back and still had employed on 31 January 2021. However, some businesses have stated they will not participate in this scheme.

  • The implementation of the Job Retention (Furlough) Scheme has not exactly been static. At first it was 80% of their salary and insurance contributions, then 80% with the employer being responsible again for contributions. It was reduced to 60% in August and October. Now it is back to 80%, but depending on how the economy opens in the next four months the rate may change again.
  • The Job Retention Scheme is economically unsustainable. Since its launch in March, it has cost the Treasury over £41 billion, or approximately half a billion pounds per month. Its replacement is estimated to cost only 300 million per month.
  • The Third Self-employed Income Support Scheme grant increases to £7,500

For those self-employed and owning their own businesses, the SEISS is a better alternative to a loan. It pays out based on their tax returns averaged over the past three years. If self-employed for less than three years, then the average of the tax returns submitted so far.

The grant is capped at £7,500 but otherwise covers 80% of their income or trading profits. This will cover from November 2020 to April 2021. Grants will be paid in 2 lump sum instalments each covering a 3-month period.

The Self-Employed Income Support Scheme (the ‘scheme’) is open to those who have annual profits of less than £50,000 and receive at least half their income from self-employment. They must prove that their income has been adversely affected by covid-19 and public health restrictions.

The Good:

  • This is a significant increase since the first round of grants closed by July 2020 was worth up to 80% of monthly profits, capped at £7,500. The second round finished claiming by October 2020 was worth 70% of monthly trading profits and capped at maximum of £6,570 (or effectively a maximum of £2,190 per month).

The Bad:

  • While good for those who own and manage their own businesses and self-employed professionals, many small freelancers still find it difficult to tell if they qualify.