Furlough vs pay cuts: what options do employers have?
“Whilst the Job Retention Scheme is a helpful fall-back option for employers, it has its limitations. The underlying goal of the scheme is to avoid mass, immediate unemployment by supporting business in paying reduced wages to workers who might otherwise have been laid off without pay or made redundant,” comments Alex Watson, Director and employment lawyer at Fieldfisher.
Below he explores what options employers have at this difficult time…
“One of the most fundamental difficulties arises for businesses that have seen a reduction in work, but not a complete shutdown – workers are still needed, but often on reduced hours or shorter working patterns.
“These situations are harder for businesses to manage under the Job Retention Scheme, which is only available for workers who provide no work for their employer for a minimum of three consecutive weeks. Instead, some employers (for a variety of reasons) may ask their workers to reduce their hours, and therefore their pay, during the coronavirus lockdown and are not eligible to claim any of these wages under the scheme.
“Over the past four weeks, we have seen many different pay and working hour schemes operated by employers, including rotating furlough between groups of workers, varied “scales” of pay reduction, some elements of pay to deferred and repaid as a bonus in 6 months’ time, voluntary reduction schemes etc, and the basis behind each policy is often unique to each business.
“However, one heartening theme that we have seen throughout this difficult time for both employers and workers is a general underlying intention to seek to be fair and minimise the financial impact on workers, particularly those on the lowest wages and with least security.
“For this reason, we have seen several businesses choose to implement smaller temporary pay reductions across the entire workforce in order to avoid more dramatic wage reductions through furlough or redundancies.”
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