EMCC European Monitoring Centre on Change

Statutory guarantee pay

United Kingdom
Phase: Management
Típus:
  • Response to COVID-19
  • Income support for workers
  • Working time flexibility
Utoljára módosítva: 01 September, 2020
Név:

Statutory guarantee pay

Angol név:

Statutory guarantee pay

Coverage/Eligibility

Workers eligible to receive Statutory Guarantee Pay (SGP) from the UK government must:

  • have been employed continuously for one month (including part-time workers);
  • reasonably make sure they are available for work;
  • not refuse any reasonable alternative work;
  • not have been laid-off because of industrial action.

An employee who is not provided with work throughout a day during which they would normally be required to work under their contract of employment is entitled to statutory guarantee pay.   

In the context of the COVID-19 outbreak, the UK government has introduced a temporary working time flexibility scheme called Coronavirus Job Retention Scheme (CJRS), open to all UK employers between April and October 2020. The scheme was also open to employers who had just made workers redundant because of the emerging impact of the coronavirus pandemic: they were able to hire the employees back and place them on temporary leave (‘furlough’) and claim financial support from the CJRS.

Main characteristics

Payments made under the Statutory Guarantee Pay scheme can only be made in respect of full working days lost. Employees who have not been continuously employed for at least one month are excluded from the scheme. Employees who do not have normal working hours prescribed in their contract of employment are also excluded from the scheme. Some collective agreements can be made in which an employer and employees decide that parts of the Statutory Guarantee Pay process should not apply to them. The agreement, for example, might state a preference for using the company’s complaints procedure rather than an Employment Tribunal process. To be legal, this exemption must be agreed by the employer and employees, and have the agreement of the Secretary of State for Business. In such cases, however, the collective agreement must contain guarantee pay provisions which are at least as favourable to employees as Statutory Guarantee Pay. 

Employers may have their own guarantee pay schemes. Such schemes cannot provide less than the statutory arrangements. If an employee is paid from their employer's guaranteed pay scheme, they cannot also be paid the Statutory Guarantee Pay. 

Since 6 April 2020, the daily maximum pay that a worker may receive is £30 (€33 as at 13 June 2020) a day for a maximum of 5 days in any three-month period, that is, a maximum of £150 (€165 as at 13 June 2020). Statutory Guarantee Payments count as income for the purposes of social security benefits and Jobseeker’s Allowance. If an employer lays an employee off without pay, not paying monies due is an unlawful deduction from wages and employees can take this matter to an employment tribunal. There is advice to employers and employees on lay offs and short-time working on the Acas (Advisory, Conciliation and Arbitration Service) website. When the Statutory Guarantee Pay entitlement has run out, employees are entitled to benefits, such as Jobseeker’s Allowance or Universal Credit, via Jobcentre Plus.

In March 2020, in the context of the COVID-19 pandemic, the UK government announced the Coronavirus Job Retention Scheme (CRJS), a temporary working time flexibility scheme, which allows businesses to retain employees and pay their wages/salary without the employees doing any working. The purpose of this scheme is to reduce redundancies and to prevent people from being laid off without pay. Lay off (without pay) is the usual option for employers when they wish to retain employees but cannot provide them with work. Under the Coronavirus Job Retention Scheme, all UK employers are able to access financial support from the government to continue paying part of the wages/salary of employees on temporary leave of absence.

The scheme is designed to support employers whose operations have been severely affected by the COVID-19 crisis and their employees. Employers can claim 80% of the monthly wage costs of employees who are on a leave of absence (‘furloughed’) , up to £2,500 (€2,750 as at 13 June 2020) a month. The government also covers the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers could not place employees on the scheme after 10 June and at the time of writing, the scheme is planned to close on 31 October 2020.

From 1 July 2020, employers could request employees to work some of the time and continue to claim the CJRS grant for the hours that the employee did not work and from  August the level of the CJRS grant was reduced each month. At the time of writing, the plan is that in October, the last month of the scheme the grant covers only 60% of wages with employers having to top up wages to ensure employees receive the maximum amount allowed under the scheme and pay employer national insurance and pension contributions for time the employees are enrolled in the scheme.

In order to bring the support to self-employed affected by the pandemic in line with that provided to employees under the Coronavirus Job Retention Scheme, the UK government introduced the Self-employment Income Support Scheme (SEISS), which entered into force on 23 March 2020. The scheme is intended to support certain groups of self-employed individuals, who were forced to close their businesses or whose ability to make a living was reduced due to the crisis.

In the first phase of SEISS (May-July 2020)  self-employed individuals could claim a taxable cash grant worth 80% of their average monthly trading profits over the last three years up to a maximum of £2,500/month (€2,750 as at 13 June 2020). The grant was paid in a single instalment covering three months’ worth of profits.

The second (and final) phase of the scheme runs between 17 August and 19 October 2020. In this phase, the self-employed can claim a 70% of their average monthly trading profits, up to a maximum of £2,190/month  (€2,400 as at 4 August 2020), paid out in a single instalment covering three months’ worth of profits.

Funding

  • National funds

Involved actors

National government
Funding
Public employment services
Acas, Jobcentre Plus

Effectiveness

The Coronavirus Job Retention Scheme appears very effective and popular with employers: 9.6 million jobs, 32% of eligible employments were supported some of the time (by 16 August, 2020) costing the UK Government a total of £35.4 billion (€38.9 billion as at 24 August 2020). The number of jobs furloughed reached its highest level at 8.9 million on 8 May.

The accommodation and food services sector had the highest furlough rate (77%), while the wholesale and retail sector furloughed the most jobs, at over 1.9 million.  In the first stage of the Self-Employment Income Support Scheme 2.7 million claims were made, that  is, 77% of the potentially eligible population used the scheme. The total value of claims was £7.8 billion (€8.6 billion as at 24 August 2020). The average value per claim was £2,900 (€3,190 as at 24 August 2020). The sector with the highest proportion of claims was the construction industry.

At the time of writing, there is no information available about the use and effectiveness of the second stage of SEISS (August – October 2020).

Strengths

The Statutory Guarantee Pay provides some income guarantee for some employees during temporary downturns.

The temporary schemes developed to mitigate the economic and social effects of the Coronavirus pandemic are thought to have been successful at reducing unemployment and poverty in the short term. 

Weaknesses

Workers not continuously employed for a month or who do not have normal working hours prescribed in their employment contract are not eligible for Statutory Guarantee Pay, which means that many workers can be excluded from coverage by the provisions, such as sales representatives and insurance agents. In addition, employees who do not work regular hours of work may be disadvantaged in terms of the method of calculating any entitlement. Payments can only be made in respect of complete working days lost, and undertaking any work on a given day can also lead to workers being excluded from coverage. In addition, the scheme is not particularly generous. The statutory rate per day is low as is the maximum amount payable (see above, coverage/main characteristics). However, employment contracts can include more than five days of contractual guarantee pay over any three month period. A final weakness of the scheme is that the responsibility for income guarantee for employees is shifted from employers to the state.

The Coronavirus Job Retention scheme introduced by the UK government in March 2020 has been criticised for excluding workers who started in a new job after the 28 February 2020 cut off point (and before the government announced the lockdown measures). The Self-employed Income Support Scheme has also been criticised because reportedly, businesses had to wait five weeks for the first payment to be made. While the delay is necessary to accommodate firms having to file tax returns, which is a requirement to be able to claim government support, the delay may be difficult for businesses that are already struggling.

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