What to do when the furlough scheme winds down
Since it was launched back in March, the Government’s Coronavirus Job Retention Scheme has saved over 9 million jobs. During the toughest moments of the pandemic, 1.2 million employers were able to make use of the furlough scheme and avoid mass redundancies. Employer contributions have started to increase and the government subsidy will slowly wind down until the scheme ends entirely on 31 October 2020.
We’ll take a look back at the last furlough updates and look forward to what your options are as the furlough scheme winds down, including:
- Bring furloughed employees back
- Continue with furlough but without a grant
- Consider redundancy for those still on furlough
We’ve run through the changes already, but here’s a quick recap of the technicalities. July saw the beginning of ‘flexible furlough’, allowing employers to bring workers back on for as much or as little time as they were able to pay for. This month, employer contributions have begun, so employers need to pay the National Insurance and pension contributions of each furloughed worker.
The government subsidy is about to go down too: in September HMRC will only cover 70% of furloughed wages, and this drops to just 60% in October. Watch out, though: every furloughed worker must still receive 80% of their wage even as the government subsidy is lowered. As an employer, it’s up to you to cover the difference.
Depending on the number of furloughed staff on your books, these contributions may have a significant financial impact. If you’re making the most of flexible furlough you’ll also have to pay for any hours worked by those on furlough, at the employee’s usual rate.
From 1 November onward, the current government support will be no more. If you haven’t run the numbers and potential workload for the next few months yet, then it’s time to be realistic about who you need and when. Once you’ve decided who you can afford and what you need help with, it’s time to think about how to handle the next steps.
There are more options than you might realise. Whatever you decide to do, make sure lines of communication are open and clear, and any changes up for consideration are clearly explained.
1. Bring furloughed employees back
Bringing furloughed workers back doesn’t have to be full-time. If this is viable for anyone you’ve furloughed then obviously the simplest solution is to bring them back as normal, but if you don’t have enough work for them to do or their full salary isn’t realistic right now, then consider talks about part-time work or reduced hours.
Any new arrangements and the related pay cuts need to be clearly discussed and agreed in writing. Don’t leave yourself open to potential employment disputes or claims. Be open and transparent to make sure they understand your clear motivations and reasons behind the change.
Any employer that holds onto a furloughed worker until 31 January 2021 will receive £1,000 per furloughed employee. It might not seem as enticing as the current furlough grants, but it may appeal to some employers. Just remember that any applicable employee needs to be earning £520 or more per month. If you’re hoping to pick this bonus up with part-time workers, make sure their salary is above this threshold in order for them to be eligible.
2. Continue with furlough but without a grant
The legal framework for furlough has been established, so if you want to keep anyone employed without working then you’re free to do so. There’s no need to draft new contracts or agreements because you have their consent from when they went on furlough in the first place.
The exception to this is if the permission you sought earlier this year only extends to a specific date. Double check your agreements as they may need to be amended in this case. And make sure it’s explicitly clear to these employees that they’re still on furlough!
Obviously this isn’t a particularly attractive option given you’d have to foot the wage bill. This solution will only be practical if you’re more wedded to not losing furloughed workers because you want the same people to work for you when more opportunities arise, and you have enough cash to support them.
3. Consider redundancy for those still on furlough
The redundancy process is serious and you need to make sure you stick to the rules closely. The main things you need to factor in are firstly: when you need to kick things off, and secondly: how to work out what redundancy pay is owed.
At the end of last month, the government clarified that all redundancy notice pay must legally be based on normal wages, not furlough pay. The announcement only applies to any businesses that hadn’t agreed redundancy terms before 31 July 2020.
Any employer making 20 to 99 workers redundant needs to make sure the redundancy processes begin by 1 October. If you’re making more than 100 people redundant then your process would need to start by 18 September to make sure you don’t start paying wages during the process period.
As long as the furlough scheme is still in place while employees are serving their notice, you can continue to claim back a portion of their wages. Bear in mind that in September you need to pay 10% of furloughed hours, which rises to 20% for October. If you don’t get things organised by these dates you’ll have to service the full amount yourself.
Every employer will decide what’s best for their business. Whatever solution you end up going for, it’s imperative that all discussion is open and your reasoning clear. It’s likely that every furloughed worker’s situation will change, and it’s up to you to make sure they understand what’s happening and why. If you’re not careful, you could open yourself up to the risk of disputes and claims of unfair dismissal.
If it’s likely that you’ll be making redundancies of more than 20 people, then you’ve got to get things ready to start those processes by the deadlines above. And if you think you can keep some furloughed workers on, don’t forget to claim £1,000 for anyone who’s still with you at the end of January 2021.
For more tips and advice head to our COVID-19 Impact Support Hub.