As a result of the Covid-19 lockdown, many businesses have struggled to maintain revenue and have had to rely on the Coronavirus Job Retention scheme (‘CJRS’), also known as the ‘furlough scheme’, to retain staff.
What is the furlough scheme?
The furlough scheme was introduced on 19 March 2020 to provide support for businesses whose operations had been adversely affected by Covid-19.
The aim was to allow companies to retain staff by giving them the option of furloughing workers they did not have sufficient work for. It was a condition of the scheme that furloughed staff did not provide any work for the company or any associated company during the furlough period although, they could work for other companies in alternative roles with their employer’s consent.
Under the scheme, the Government initially agreed to reimburse up to 80% of the employees’ wages up to a cap of £2,500 per month, per employee, and to reimburse employer’s National Insurance contributions and the minimum auto-enrolment employer pension contributions on the furloughed payment (i.e the 80%).
Initially, any employee paid through PAYE could be furloughed, including those on full-time, part-time, agency, flexible or zero-hour contracts, as long as they were on the company’s payroll as of 19 March 2020. Company directors are also covered by the scheme, provided they have an employment contract and were paying PAYE as at the date above.
From 1 July 2020, the scheme changed and ‘flexible furlough’ was introduced. This meant that employers could bring their furloughed employees back to work on a part-time basis and still claim for unworked hours under the furlough scheme. Any hours the employee worked had to be paid at their usual rate of pay (i.e. not the reduced furlough amount).
At the time of introducing flexible furlough, the Government announced that the scheme would be terminated at the end of October and the amount of financial support on offer would gradually start to decrease as follows.
- From 1 August 2020 – Employers will pay the employer NI contributions (‘NICs) and employer pension contributions, with the CJRS continuing to pay 80% of wages up to the cap of £2,500.
- From 1 September 2020 – There will be no contribution to employer NICs or pension contributions and employers will have to contribute to the 80% of furlough pay. The employer will pay 10%, with the furlough scheme paying the remaining 70%, capped at £2,187.50.
- From 1 October 2020 – There will be no contribution to employer NICs or pension contributions and employers will also have to contribute to the 80% of furlough pay. The employer will pay 20%, with the furlough scheme paying the remaining 60%, capped at £1,875.
For more information on the flexible furlough scheme, read our article here.
What will happen when the furlough scheme ends?
Despite much criticism, Chancellor Rishi Sunak confirmed the furlough scheme will end in October, leaving many jobs unprotected.
The idea of the furlough scheme was to enable employers to maintain their workforce through the Covid-19 crisis without having to make redundancies. This would allow them to be ready to restart the business once the immediate crisis was over and demand started to increase. Unfortunately, many companies are finding demand is not returning as quickly as hoped and the threat of a second wave of infections means they cannot delay difficult decisions once the CJRS support is no longer available.
So, when the furlough scheme ends what options do employers have?
Bring staff back full time – Employers who expect to return to pre-lockdown levels relatively quickly may want to bring their staff back full time. This will be subject to health and safety risk assessments and Government guidance in place at the time. It is recommended that employers should give furloughed employees 24-48 hours’ notice of any dates they are expected to return to work. If employers bring their staff back and keep them in employment until January 2021, then they will receive a £1,000 bonus from the Government’s Job Retention Bonus Scheme (more information here).
Bring staff back on reduced hours – If employers want to bring staff back on different terms and conditions, such as reduced hours then they will need to consult with staff about the proposals and the reasons for them and, ideally agree the changes with them in writing. Where 20 or more employees are affected by the changes, representatives will need to be elected as part of the collective consultation process.
Make redundancies – if the business identifies a reduced need for employees to carry out specific roles, or it is closing its place of work or business then it will need to consider making redundancies. Depending on the numbers involved, this may involve collective consultation.
If a business is making more than 20 people redundant (but fewer than 100) then it must elect representatives and consult for at least 30 days before giving notice. Where 100+ employees are affected, the consultation period is 45 days. If a company fails to comply with the collective consultation obligations, it entitles the affected employees to bring a compensation claim for up to 90 days per employee (no minimum service requirement). It is worth noting, employers do not have to wait for the furlough scheme to end to make redundancies.
In any event, employers should consult with employees about the reasons for the proposed redundancies and explore alternatives to dismissal where possible.
For more information on redundancies, read our article here.
Whichever of the above options employers decide to choose, they should keep in mind that most employees will be struggling with the uncertainty of the current situation. It is therefore important for employers to maintain clear and open communication with their employees, ensuring to keep them updated where possible.
How Blaser Mills Law can help
If you are looking for further advice on what to do when the furlough scheme ends, please contact our employment team on 020 3814 2020, or email James Simpson at firstname.lastname@example.org or Debbie Sadler on email@example.com.