Over the last few weeks, I have received many enquiries about furlough and the impact on businesses once the Coronavirus Job Retention Scheme ultimately comes to an end.
Therefore, I thought I would do a special #TinaTalks that focuses on furlough and what the end of the scheme will mean to assist those of you who may currently have concerns as to the "next steps", as it were.
Overview of the scheme
By now, I am sure you have all heard of the Coronavirus Job Retention Scheme, which enables employers to place employees and workers on furlough leave. Furlough leave, in effect, enables employees and workers to remain employed or engaged by a company despite not undertaking any work for them or only undertaking work on a part-time basis. If work is being conducted on a part-time basis, this is commonly known as "flexible furlough".
There have been numerous changes to the scheme since Rishi Sunak first brought it into play in March 2020; this has often confused the exact scope of the scheme for employers and me receiving multiple questions as to what the scheme now allows for. Therefore, as a brief overview as to the current parameters:
- The scheme is due to end on 30 September 2021. Therefore, after 30 September 2021, employers will no longer be able to designate employees as on furlough leave. The scheme was only intended to last for a matter of months, but it has repeatedly been extended and has now been in existence for over a year.
- While another extension is possible, considering the Government's roadmap currently in place, it is hoped that by September 2021, things will have returned to a state of more normality. Therefore, it would seem an appropriate time for the scheme to come to an end.
- Under the scheme, employers can claim 80% of an employee's usual salary for hours not worked (i.e. the hours the employee is on furlough), up to a maximum of £2,500 per month. Employers remain responsible for paying employer national insurance contributions and pension costs.
- However, this is due to change from 1 July 2021, with the level of grants employers can claim from the Government being reduced. I have been receiving questions about what this reduction is and whether employers must bear any additional cost. First and foremost, it is important to clarify that the reduction in the level of the grant provided by the Government will not impact the level of income the employee receives. Employers will be asked to contribute towards the cost of their furloughed employee's wages, and therefore there will be increased financial costs to employers in continuing to use furlough. The changes to what the employers can claim will be:
- In July 2021, employers can claim up to 70% of furloughed employees' wages, up to a maximum of £2,187.50.
- In August and September 2021: Employers can claim up to 60% of furloughed employee's wages, up to a maximum of £1,875.
- Employers will be responsible for making up the difference so that furloughed employees continue to receive 80% of wages for hours not worked, up to a maximum of £2,500 per month.
Employers must continue to pay all employers national insurance and pension contributions.
For claim periods after 1 December 2020, employers cannot claim for any contractual or statutory notice period.
Who can be furloughed?
This is a question I am commonly asked at the moment. There is uncertainty surrounding when a company must have employed an employee to make them eligible for furlough.
For claims up to the end of April 2021, employees must have been on the PAYE payroll on 30 October 2020, and the RTI submission for that employee must have been made between 20 March 2020 and 30 October 2020.
For claims from May 2021, employees must have been on the PAYE payroll on 2 March 2021. This means the RTI submission for that employee must have been made between 20 March 2020 and 2 March 2021.
You can furlough new joiners recruited between 31 October 2020 and 2 March 2021, but you would need to wait until May 2021 to do so.
You cannot furlough any new joiner who starts on or after 3 March 2021.
There is no limit on re-furloughing employees under the scheme, as long as they are eligible for furlough.
It is worth pointing out that it is important to have an employee's written consent to be designated a furloughed worker.
What happens when the scheme ends?
As previously stated, the scheme is currently due to end on 30 September 2021. There is no guarantee that there will not be a further extension; however, I think this is unlikely, so employers should plan for the eventuality that the scheme will finish on this date.
The furlough scheme has provided businesses with significant financial savings regarding their employees over the time in which it was in force. However, notwithstanding these savings, many businesses may find themselves in a position where they have not fully recovered by the end of the scheme in September 2021 and are therefore forced to consider further cost-saving measures.
In such situations, businesses will need to look to the alternative options in play before the scheme launched in March 2020. These include short-time working and lay-offs, which are less drastic measures, alongside redundancies.
- Short-time working and lay-offs are more temporary measures that can be implemented to try and help stabilise the business if there is still insufficient work, but an upturn is expected soon. These involve reducing the number of hours employees work for you - potentially even to zero hours for a while. There is no limit the how long employers can lay off employees or place them on short-time working. If employees are laid off or put on short-time working for four weeks in a row or six weeks over 13 weeks, employees are able to apply for redundancy and claim redundancy pay.
- Redundancies may be needed where the business does not believe there is sufficient work and the level of work is unlikely to increase for some time. This would likely have been the outcome required by many employers had the scheme not been implemented last year.
What is the redundancy procedure?
I have been asked to briefly outline what the redundancy procedure would involve if this measure is required once the scheme runs out. We have a detailed guide on redundancies for further information.
The most important thing to bear in mind at the outset is that there needs to be a genuine redundancy situation; otherwise, this could open the employer up to claims for unfair dismissal at an employment tribunal. For there to be a genuine redundancy, the employer must show that there is no longer a requirement for the employee's job.
The process employers should then look to follow will include:
- Consider the number of roles at risk of redundancy. If there are over 20 roles at risk, then there are additional obligations placed on an employer which they must comply with.
- Look for alternatives to redundancies – this could include recruitment freezes or reduction of hours, or ceasing overtime. Even if you do not believe these alternatives will be viable, it is essential to consider these before dismissing them.
- Establish which roles are at risk of redundancy. If multiple employees undertake such roles, these individuals will need to be placed in a "pool" so that fair and objective selection criteria can be applied to each of these individuals to establish who will be made redundant if redundancies are required.
- Employees must then be informed if they are at risk of redundancy (and the intended selection criteria to be used if they are in a pool of roles) and invited to an initial consultation meeting.
- Once the employer has had time to digest the input and comments from the initial consultation meeting, a second consultation meeting should also be arranged. If there is a pooling situation, employees should be informed at this second meeting of their provisional score against the selection criteria and the highest and lowest scores. Employers should ensure that they discuss the selection criteria with the employee before finalising this.
- Once the consultation has finished, a decision must be communicated to employees regarding whether their roles have been determined to be redundant. If so, employees must be offered the right to appeal this decision.
- An appeal process and meeting must occur if employees wish to appeal the outcome.
If I am required to make an employee redundant, do I need to offer them another role?
It may be the case that an employer has to make an individual's role redundant as there is no work with their current role. However, the company is trying to recruit for another team or department where work is booming. To ensure a fair redundancy process is followed, employers must offer any individual at risk of redundancy suitable alternative employment as part of the consultation process.
Of course, the vacancies at the company may not be suitable for the employee, or there may not be any vacancies at the time. If the employee's role is made redundant, the business will be unable to retain them.
If an employee does accept suitable alternative employment, it is essential to note that there is a trial period of 4 weeks within which they can assess whether the role is, in fact, suitable. If the employee decides the role is not for them during this period, they must be treated as still having been made redundant and paid accordingly.
I have heard of the requirement of collective consultation. Do I need to do this in a redundancy process?
Collective consultation is required where 20 or more employees could be dismissed because of redundancy from one establishment in a 90 day period. Collective consultation would occur before individual consultation in the redundancy process.
Due to numbers, it would be impractical for the company to speak to every individual at risk of redundancy at the initial stage. Therefore, the employees can elect representatives who employers will consult and inform regarding the potential redundancies. In turn, the representatives will then notify and consult with all the affected employees to give feedback to the employer on any comments, questions, or proposals.
There are time limits that employers must comply with when engaging in collective consultation, which vary based on the numbers of employees involved. Suppose there are between 20-99 proposed redundancies. In that case, no employee can be made redundant until at least 30 days have passed since the start of consultation and notification of this is received by the Department for Business, Energy and Industrial Strategy.
If more than 100 redundancies are proposed, this time limit is increased to 45 days. Employers can inform the Department for Business, Energy and Industrial Strategy by completing an HR1 Form.
Failure to follow the correct procedure or time limits can result in claims for unfair dismissal in respect of the redundancy process and employees being granted a "protective award", which is up to 90 days gross annual pay.
What about employees wanting to work from home moving forwards?
Due to the need for home working during the pandemic, many businesses had to adjust their working style and move to home working. Now that employees have experienced home working, there is a growing demand to continue moving forwards.
There is no obligation on employers to allow home working. However, given that home working has now been "tried and tested" and can work effectively for many employees, employers should try to consider this and how it may be able to integrate home working into their business to allow some employees a better work-life balance. Given that systems have been put in place to enable home working, it will be harder for employers to argue that this would be less effective – for some employees, home working may even be more effective.
Therefore, whilst employees have no right to demand to work from home, employers may see additional requests for this and should try to prepare for how they intend to deal with these. It may be helpful to implement a home working policy to inform employees of how the business will operate going forwards in this regard.
If you need any advice on the furlough process, please contact one of our employment lawyers.