The end of the furlough scheme : key considerations for employers
The end of the furlough scheme : key considerations for employers
The Coronavirus Job Retention Scheme, otherwise known as the furlough scheme, is due to end on 30 September 2021. Data suggests that just over 5 million employees were on furlough leave as of January 2021, and approximately just under 2 million employees remain on furlough leave as of July 2021. The scheme was intended to save jobs and livelihoods during the pandemic and allow employers enough time to financially bounce back and bring those employees back to work and pay wages in full.
We know that the Government will continue to gradually reduce their contribution toward wages under the furlough scheme – for August and September, of the 80% of wages paid under the scheme. The Government will contribute 60% and employers will pay 20% (and more if they have agreed to top up employees’ wages).
What does the end of the Furlough Scheme mean for employers?
Employers will now need to start thinking about what will happen to those employees who remain on furlough. Government contributions toward wages will end with the expiry of the scheme. For some employers, they will be in a position to welcome back staff to their previous roles and be able to pay 100% of their wages once again. Unfortunately, for other businesses, they will not have financially recovered enough to be able to take all staff back from furlough leave and pay full wages.
Whatever the situation, every employer with employees on furlough leave will soon need to think carefully about the next steps. I set out below a few of the main considerations that employers will need to grapple with over the coming weeks and months.
When to bring an end to furlough leave
Employers will need to consider when to end an employee’s furlough leave. Every employer will need to make a decision as to when they will end an employee’s furlough leave based upon the needs of the business. Some of the key considerations will be:
- Which roles are required back first/at all?
- Which employees should remain on furlough due to specific circumstances, such as health or child care issues?
- The increased cost of the furlough scheme and reduction of government assistance up to 30 September 2021.
For some employers, they will need to leave staff on furlough until the expiry of the scheme at the end of September. For others, business may have recovered sufficiently to allow them to end furlough leave for their staff before then and welcome them back to their roles.
Communication and notice
Clear communication with staff on furlough has, and will continue to be, crucial. Employees on furlough leave may well feel isolated and so employers who are open and transparent with staff on furlough leave will help them feel informed and included. Employers will need to ensure appropriate notice to end furlough leave is given in line with any furlough agreement in place.
Integration and information
Employers will need to consider how best to integrate staff who have been on furlough leave back into the office. They will need to make sure employees have been informed that a COVID-19 risk assessment has been undertaken and informed of measures put in place to mitigate the risk of COVID-19 infections in the workplace. Doing this will hopefully go a long way to allaying any concerns furloughed staff have about returning to the workplace.
Many employers have put in place flexible, or hybrid, working schemes to meet the aspirations of employees to maintain some of the flexibility they have enjoyed during the pandemic. Employers should also update those who have been on furlough leave regarding any such flexible working arrangements that have been put in place.
Employees on furlough leave will of course have the right to make a request for flexible working under the statutory scheme as any other employee (if eligible).
Changes to terms and conditions of employment
Importantly, a key consideration for employers will be whether they are in a financial position to welcome the employee back to their role, or whether they will need to consider a permanent or temporary change to terms and conditions of employment, such as a reduction in pay. Any changes to employees’ terms and conditions of employment will require employee agreement. It may be that cost cutting measures are still required post the furlough scheme.
It would be best, where possible, if any changes, such as pay reductions, are presented as a temporary arrangement which will be reviewed after an agreed period of time – for example, 6 months. Another option may be to consider redeployment to another role where this is a possibility; again, this will require employee agreement.
The “R” word
The Office for National Statistics reports that the rate of redundancies recorded since the beginning of the pandemic already exceeds the highest rate reached during the 2008 to 2009 financial crisis. It is inevitable that many employers will have to make redundancies once the furlough scheme comes to an end. Those employers will therefore need to prepare for a formal redundancy process. Employers have made redundancies throughout the pandemic – whether they have used the furlough scheme or not. Many employers will have left employees on furlough leave in the hope that business will have picked up by September and they can avoid making redundancies. Unfortunately, the reality will be for many employers that there is still a reduced need for staff, or indeed a need to close workplaces or business altogether, and that redundancies will become a necessity.
A fair process must be followed and it is important this is planned. This will involve individual consultation with those at risk (collective consultation will be required where an employer proposes to dismiss 20 or more employees over a 90-day period), a consideration of alternative vacancies and a redundancy payment to those who are eligible (either statutory or enhanced if such a scheme is in place).
Employers should take professional advice. It will be crucial that employers take legal advice especially when considering changing terms and conditions of employment or commencing a redundancy process. This will reduce the risk of claims being brought against the company.
Furlough leave was unchartered territory for employers, those working in HR and of course those employees who were furloughed. A careful navigation was required back in March 2020 when millions were put onto the scheme. Employers will now need to consider carefully their navigation out of the scheme; how and when this is to happen and any further workforce changes required to mitigate the financial impact of the pandemic on their business.
If you would like to discuss any of the issues raised in this blog please contact a member of the Employment team.