The Coronavirus Job Retention Scheme (commonly known as the Furlough scheme) has provided support to thousands of businesses since the onset of the pandemic, despite originally only meant to be in place for 3 months. However, with the recent lifting of nearly all coronavirus restrictions in England, it now seems unlikely that the scheme will continue beyond the current end date of 30th September 2021 and the days are ticking down for employers.
The Furlough Scheme has enabled employers to retain employees with a view to them returning to work as business and the economy picks up. Many furloughed employees have now returned to work, but for those who haven’t, businesses now need to decide whether they can afford to have employees return, and if not, how to handle a possible reduction in headcount as time is running out. We set out some of the key considerations below.
• Previously the rules of the Furlough Scheme allowed employers to still claim for those employees serving their notice periods. This was a significant saving for employers, with many acting quickly to make redundancies to take advantage of the generosity of the scheme. However, the rules of the scheme changed on 1 December 2020 meaning it is no longer possible for an employer to claim furlough money for any employee serving their notice. In addition, it is not possible to claim any money from the scheme towards redundancy payments which may be due.
• Employers need to factor in the length of notice periods when considering headcount reduction.
• Employers should note that all employees who have two years or more service are entitled to a statutory redundancy payment and can claim unfair dismissal if the reason for dismissal is not a genuine redundancy. Some employers we know have put poor performing employees on furlough and now do not want them back even if there is work for them to do. In addition, employers should consider if employees have any accrued but untaken holiday which may need to be paid out on termination. The contract may allow the employer to determine that this is taken as part of their notice so that it is not being paid twice. An employer may therefore decide it is better to act sooner rather than later, especially given they will be liable for 100% of salary from 1stOctober 2021.
• Employers should consider if there are any possible alternatives to redundancy, given the potential cost involved, particularly for high paid and long serving employees. Alternatives could include agreeing with the employee to reduce hours or to move them into alternative roles.
• If an employer intends to make 20 or more redundancies within a 90-day period, then they will be obliged to collectively consult with its employees. This requires nominating and electing employee representatives as well as consulting for a minimum of either 30 or 45 days depending on the number of employees affected. This is a big undertaking for any employer, and for this reason it makes sense to plan such a process well in advance.
• Even if there are less than 20 employees being made redundant within a 90-day period, an employer still has an obligation to consult with those employees affected. This means the employee should be given the opportunity to respond and comment on any proposals as well as being considered for any suitable alternative vacancies. If it fails to follow the correct and a fair procedure, it risks unfair dismissal claims from those employees affected.
Therefore, if as an employer you are needing to make headcount reductions as the Furlough Scheme ends plan now and do not wait until the 30 September 2021. We find that planning with our clients makes the process go more smoothly and avoids time consuming and expensive claims.
If you would like to discuss your employment rights and any other legal issues your business might be facing once the furlough scheme ends, then please contact Nick Hine at nick.hine@ilaw.co.uk or Ben Payne at ben.payne@ilaw.co.uk
