What are the options for UK Employers when the Furlough Scheme comes to an end?

13
Oct

From the very beginning of this pandemic, employers have been working tirelessly to adapt to the changing circumstances and shore up their businesses in the hope that their employees would have jobs to return to once the initial impact was over.  The Government’s Coronavirus Job Retention Scheme (CJRS) has undoubtedly played a huge part in helping businesses to weather the storm and preserve jobs during an unprecedented period of uncertainty, so what happens when this scheme comes to an end on 31st October?

Many businesses have already taken some initial steps to minimise their staff costs over the past 6 months – from pay freezes and postponement of recruitment plans to scaling back on outsourcing costs – but, from the end of this month, big decisions need to be made regarding those employees who still remain on furlough leave.  For some, the answer will be obvious. For others, a more creative approach may be required.  These are what I believe to be the four main options available to employers at this time. 

 

1.  A return to normal working hours

For businesses which have made it through the past 6 months in better shape than anticipated – and have perhaps already began the process of bringing back some of their employees from furlough leave, either on a part-time or full-time basis – this is certainly the most straightforward of the options available. 

Although there is no minimum notice period to end the furlough arrangement, if you choose to go down this route, you should begin the conversation with your staff as early as possible and provide written notice confirming your intention to end their furlough leave and their return to work date.

Please be mindful of the fact that, whilst many employees will be very excited to get back to “business as usual”, we are all still operating in an ever-changing landscape, with new advice and restrictions being announced all the time and you should continue to encourage your staff to raise any concerns or issues with you.  It is vital that you plan for any return to work – whether this be a physical return to the workplace or a resumption of duties on a remote basis from home – in a way that cares for your staff and safeguards their health and wellbeing.

 

2.  Utilising the government’s Job Support Scheme

Not all businesses will be able to pick up where they left off once the CJRS comes to an end, however that’s not to say that there isn’t light at the end of the tunnel.  For those businesses who expect the disruption to be temporary and are still operating at such levels where they are able to continue employing their workers over the coming months, even if only part-time, the government’s Job Support Scheme (JSS) could offer a useful stepping stone back to normality.

The JSS is available for a period of 6 months from 1st November 2020 until 30th April 2021, and is designed to continue supporting businesses who have “viable” jobs to offer when the CJRS comes to an end.  For full details of which employers and employees are eligible for the scheme, please refer to the Government guidance, however the key points are as follows:-

  • The JSS will be available to businesses even if they have not previously furloughed staff under the CJRS.
  • Claims can only be made in respect of employees who are working.
  • Employees must work at least 33% of their normal working hours and the employer will continue to pay its employee as usual for those hours.
  • The cost of the employee’s salary for the remaining hours not worked will be split as follows:-

 

For businesses required to close their premises due to local or national Coronavirus restrictions

- Two thirds paid by the Government (by way of a grant capped at £2,100 per month and excluding pension contributions and NICs) – NB. Businesses will only be eligible to claim the grant while they are subject to restrictions and employees must be off work for a minimum of seven consecutive days;

- Zero contribution by the employer (although they will remain responsible for pension contributions and NICs)

- One third paid by the employee (by way of a wage reduction);

 

For all other businesses

- One third paid by the Government (by way of a grant capped at £697.92 per month and excluding pension contributions and NICs);

- One third paid by the employer (contribution uncapped);

- One third paid by the employee (by way of a wage reduction)

This means that employees will earn a minimum of 77% of their normal wages, where the Government contribution has not been capped, but employers will be required to meet a higher wage cost burden under the JSS than they did under the CJRS.

 

It is important to note at this point that, in addition to the JSS, the government is also offering a £1,000 Job Retention Bonus to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021.  The key points to be aware of are set out below but, again, please refer to the Government guidance for details of how to check your eligibility:-

  • The bonus can be claimed between 15th February 2021 and 31st March 2021 and will be a taxable one-off payment.
  • To qualify for the bonus, the employee must have previously been furloughed under the CJRS.
  • The employee must be continuously employed by the employer from the employer's most recent furlough claim through to the end of January 2021.
  • Employers can only claim for employees who earn an average of £520 per month between 1st November 2020 and 31st January 2021, provided that there has been some level of earnings in each of the three months which has been paid and reported to HMRC.
  • The bonus amount is the same for each employee irrespective of their salary.
  • The employee must not be on contractual or statutory notice for a period that started before 1 February 2021 for the employer to make a claim.
  • Unlike the grants claimed through the CJRS, this payment is a bonus for employers and does not need to be passed on to the employee.
  • Employers are still able to claim the bonus if they make a claim for that employee through the JSS.

 

3.  Alternatives to redundancies

As mentioned already, the JSS is designed for businesses who expect to still have “viable” jobs available at the end of April 2020.  For businesses who are experiencing more long-term disruption to their operations, and do not expect work to return to its pre-Covid levels for some time yet, the JSS may not be the most appropriate option for you.

Before we turn to the final option, which all employers are desperate to avoid, let us consider some other alternatives which may be available.

Re-negotiating new terms and conditions with employees

For the vast majority of employees, they will of course be hoping to find their job exactly as they left it before  they began their period of furlough leave.  However, this is not going to be possible for everyone and, when the alternative for some people may be redundancy, employers may find that staff are receptive to temporary or permanent changes to their terms of employment as a means of securing their future with the business.

Clearly, this is something which would need to be handled with the utmost sensitivity and you should seek to involve your employees as early as possible in the process.  Some of the changes which you might wish to put on the table for discussion could include reduced hours, reduced pay, a new role, different shift patterns or a variation to commission/bonus terms and pension entitlement.

Redeployment

Depending on the size and scale of your business, you may have the option to move an employee to other areas of the business where there is more demand, either temporarily or on a permanent basis.

Unpaid leave

This is unlikely to be a viable option for many employees but not something to be dismissed out of hand.  For employees who may not be feeling the same financial pressures as some of their colleagues, they may be receptive to an opportunity for a period of unpaid leave from work.

In all cases, you will need to obtain the employee’s written consent unless their existing employment contract allows you to make these changes.  If you are at all unsure as to the correct approach in tackling these discussions and dealing with any amendments to your employment contacts, I would strongly recommend you seek specialist legal advice before any action is taken.

 

4.  Redundancies

As we know, some sectors have been abruptly stopped in their tracks by the arrival of Covid-19 and the subsequent Government restrictions and, for many businesses in those sectors, they will be left with no viable option but to implement their redundancy programme.

This is not a decision which any business takes lightly.  It goes without saying that redundancies take a huge personal and emotional toll on both employers and employees, but there are also significant cost factors to keep in mind when considering this option, including the time spent by senior staff members in following due processes, the potential for Unfair Dismissal claims if such processes are not followed correctly, the loss of skills in the business, future recruitment costs, and of course the cost of the redundancy payments themselves. So clearly this is a last resort, to be considered only when all other options have been fully explored.

For any employers who believe that this may be the only option left open to them, these are just some of the points which you should keep in mind in the context of the current global situation:-

  • You can commence a redundancy procedure which includes furloughed employees before the end of October and still claim the furlough grant. However, as the purpose of the CJRS was to allow employers to continue to trade and retain staff, mass redundancies at this stage may raise some questions at HMRC.
  • All employers have a duty to consider all the alternatives to redundancy so, as part of any consultation process, you should fully consider whether the JSS and Job Retention Bonus could help to avoid redundancies. It would be prudent to keep copies of all furlough agreements and any other written evidence to show that your business has been negatively affected by the pandemic and that redundancies are the only course of action available to you.
  • The rules on calculating statutory redundancy and notice payments have been amended to ensure that the employee’s normal full rate of pay (i.e. not the reduced furlough pay) is used as a basis for working out redundancy payments.
  • For any employees who are currently serving their contractual or statutory notice period, you are still entitled to claim furlough grant for those individuals.

 

To discuss any of the options raised in this article, or for further advice and support in relation to any Employment or HR matter, please email Jonathan Moreland (jmm@swinburnemaddison.co.uk) or contact him by telephone on 0191 384 2441.

 

 

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