So Long, Fur-well: Planning for the End of the Furlough Scheme

The Coronavirus Job Retention Scheme (CJRS), or ‘furlough scheme,’ is scheduled to run until 30th September 2021.  With this deadline looming, now is the time for employers to start planning for a return to the workforce for staff who have been placed on furlough.

Unwinding of Furlough

According to official statistics, the furlough scheme has supported 11.5million jobs since March 2020 and an estimated £61.3 billion has been claimed by employers.

These statistics highlight not only the crucial part that the scheme has played in keeping a lot of businesses afloat during the pandemic, but also that it has acted as a lifeline to millions of households across the UK. 

Under the furlough scheme, the UK Government had been paying 80% of the wages of people that weren’t able to work, or whose employer could no longer afford to pay them, capped at £2,500 per month.  From July 1, the UK Government started to unwind the scheme by reducing their contribution to up to 70% of salaries, meaning employers had to pay 10% and, for August and September, their contribution will be 60%, with employers paying 20% of salaries.  Despite many calling for an extension to the scheme, the current position is that it will by entirely phased out by the end of September.

When the furlough scheme comes to an end, the options for employers are generally to either bring employees back into work on the same or different terms, or to carry out a redundancy exercise. The latter two require some thought and planning.

Changing Employees’ T&Cs

If employers wish to bring their workforce back to work and require to change their current terms and conditions, there are four ways to do so:

  1. In accordance with contract terms;
  2. By consent;
  3. Unilateral change; and
  4. ‘Fire and rehire.’

The first step is to review the employees’ contracts as they will cover proposed changes.  However, it is important to note that an express contractual authority to change terms, does not automatically ensure that the employer’s actions are lawful. Employers are bound by an implied duty of mutual trust and confidence which requires them to not act unreasonably. 

If employees’ existing contracts of employment do not allow for any changes, it is prudent to try to agree the new terms with the employees. Variations can be made orally or in writing, but written agreements are essential to try to avoid any future disputes.

If employees refuse to agree to the proposed changes, employers may try to impose contractual variations unilaterally. This carries the risk of a constructive unfair dismissal claim.

A final option is to dismiss employees and then re-engage them on new terms, this is what is known as ‘fire and rehire.’  Employers must have a genuine business need for making the change and be able to show that the dismissal was overall and procedurally fair.  Although this is a preferable option to unilateral variation, it is not without risks and may have a negative impact on staff relationships and morale. We have seen negative publicity for larger employers such as Tesco and British Gas who did this, this year.

Depending on the numbers of employees involved, employers should consider whether collective consultation with elected or appointed employee representatives or trade union representatives is required. The definition of “dismiss” in the collective consultation law, includes dismissal to change terms and conditions where the contract changes are planned for 20 or more employees. The length of consultation is a minimum of 30 days and at least 45 days depending on affected employee numbers. There are also requirements for sharing information in writing, at the outset of the consultation period. Failure to follow the collective consultation rules, carries the risk of a penalty of up to 90 days’ pay per employee, if a claim to tribunal is made on their behalf.

Redundancy

If, contractual changes are not a feasible option, then an inevitable course of action may be to reduce head count by way of redundancies. Again, this may require collective consultation,  depending on the numbers involved, suitable time to organise and employee representatives where necessary.

Before making any compulsory redundancies, it is good practice for employers to ask for volunteers for redundancy, even if this might mean offering a more generous redundancy package.  This may reduce the need to select for redundancy, and those employees who choose this, are less likely to raise claims in respect of their redundancy.

Compulsory redundancy processes are the same as they were pre-pandemic, with meaningful consultation, fair selection and consideration of possible alternatives required. Employers should avoid relying on factors which may be discriminatory, such as sickness absence, pregnancy/maternity or inappropriate reliance on length of service. With the possibility of unfair dismissal claims or discrimination allegations, employers must ensure that any redundancy exercise is well planned and handled diligently, sensitively and legally.

Need assistance?

Our specialised Employment Team will be able to support and guide businesses through any restructure or redundancy process, ensuring that each employer is legally compliant whilst achieving its objectives.  If you require advice or assistance in relation to this, please do not hesitate to get in touch. 

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