On 29th May plans to wind down the furlough scheme were announced by chancellor Rishi Sunak. The current plan is to close the scheme completely by the end of October. In the meantime it does introduce flexibility to combine furlough and part-time working.
Now that we have the scheme information alongside an idea from the government of when and how businesses can reopen, this is the time to plan the next steps for your business.
Key Features of the Scheme
Crucially - if you plan to make use of furlough going forward, you must have furloughed employees for at least a period of 3 weeks prior to 30th June. This means that if an employee has not yet been furloughed but you may need to furlough them before the end of October then they must be placed on furlough by 10th June.
The flexible furlough scheme starts on 1st July, allowing employees to work reduced hours whilst still claiming from the job retention scheme for the hours the employee is not working. This could be useful for a business reopening but not in a position to provide all employees with their full hours, either due to reduced demand or to reduce people in the business for social distancing. An employee could for example work 2 days per week, in which case if they normally work 5 days the other 3 could be claimed at 80% wages under the furlough scheme.
July will be the final month that the government grant will cover the full 80% of wages for furloughed workers. From August the government will continue to cover 80% of wages but employers will have to pay the employer national insurance and pension contributions.
In September employers will be required to contribute 10% of the 80% wages paid to furloughed workers (for the purpose of this guide we are assuming employers are paying only the 80% rather than topping up to 100%). In October, for the final month of the scheme, employers will need to contribute 20% with the government paying 60%.
What does this really mean for employers?
How this scheme benefits or not you as an employer will depend on your business and the impact Coronavirus and lockdown has had on your it.
If your business can reopen and you are able to use the flexible scheme to support reduced hours then this may ease you back to normal hours and wages for all employees. However, for many businesses this will not be the case.
Consider the costs of retaining employees through this period and beyond. Do you have sufficient work and money to cover wage costs? This is particularly important to consider from July when you could be contributing to wage costs of people not working.
Changes in Working Hours
A change or reduction in working hours is likely to be a change to terms and conditions of employment, whether temporary or permanent. This will require consultation and agreement from employees.
Consider both the immediate period whilst the furlough scheme is still available and what may happen beyond that.
Whilst the aim of the furlough scheme has been about job retention the unfortunate reality is that for many businesses redundancies will be unavoidable.
Redundancy is a dismissal with notice. Many people have a contractual notice of one month. Even without a contractual notice period, the statutory notice period is 1 week for up to 2 years service and then 1 week for each year of service up to a maximum of 12 weeks after 12 years. As a result many of your employees may have 4 or more weeks notice.
The current furlough scheme permits furlough to continue through consultation and notice, however, furlough grants cannot be used to cover redundancy payments.
A reduction in work or closure are both reasons for dismissing someone by reason of redundancy, which is a fair reason for dismissal. However, in order for that dismissal to be deemed fair, a fair procedure must be followed.
A fair procedure requires that employees are warned that redundancy is possible. This should be happening at the early stages of the business becoming aware that this may happen. Even with the furlough scheme, if it is likely that redundancies will still be necessary once the scheme ends then this should be communicated to employees.
Once this has been communicated, employees should be consulted and a fair selection criteria and process used. Where a selection pool is required because you are only making some rather than all redundant then you should consult with employees on the method of selection. The consultation should also consider whether there are alternatives to redundancy.
If you will be making less than 20 redundancies then individual consultation is required. There is no statutory minimum length for this, though the process must be fair as described above. When over 20 redundancy dismissals may occur then collective consultation is required, over a period of 30 days for 20-99 redundancies and 45 days for 100 or more redundancy dismissals. Specific advice should be taken when considering any redundancies to ensure the appropriate consultation is undertaken.
Time may be of the essence!
You may need to be thinking about this now.
Whilst there is no specific legal requirement over the length of time for individual redundancy consultation we would expect that in most circumstances around two weeks would be needed to demonstrate a fair procedure. When this is added to notice periods, it’s certainly not too early to be considering decisions around redundancy, particularly if the business is not in a position to pay wages after the furlough scheme ends.
Article last updated: 2 June 2020
Explore our Knowledge Hub for more like this.