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Legal Update

Furlough. Fin.

A brief recap

Furlough was first implemented in March 2020 and allowed employers to claim grants from HMRC to cover 80% of the wages cost of employees up to £2,500 per month, per employee. This lasted until 31 July 2020 when contributions decreased and employers were made to pay the shortfall. The contributions then returned to the first iteration when a new lockdown began in December 2020, subsequently being extended first to March, then to April and then to this September where it appears to finally be at an end.

Since July, HMRC’s contribution has tapered down to 70% and then to 60% at the beginning of August 2021.

What now?

At its peak in May 2020, almost 9 million jobs were being supported by the scheme. Now, this has significantly reduced, and it has been reported that around 1 million people are still being supported by the scheme (1.7 million were being supported only a month ago).

Suddenly, the safety net of furlough is being pulled away and businesses, which have been struggling, will have to make the decision – are they able to support the individuals who have remained on furlough to date, or do they need to consider making redundancies? Two months ago, we suggested that this would be the case, and it’s difficult to see how it couldn’t.

Whilst the newspapers write articles each day on labour shortages, it is hard to believe that these are the same industries which are continuing to furlough workers. People will need to retrain to do so, and this doesn’t come at small expense or in a small amount of time.

What are we missing?

On 8 July 2020, the Chancellor announced that employers would be paid a job retention bonus of £1,000 for each employee they brought back from furlough and continuously employed through to January 2021. This was subsequently scrapped in November when the furlough scheme was extended. The government said at the time that a different job retention bonus would be introduced at a later date. So far, no further information has been forthcoming, and it looks unlikely that one will be announced.

What should you be doing now?

Businesses who have utilised furlough to the bitter end should carefully reflect on their business model. In particular:

  • Are their pre-COVID-19 business and staffing structures still viable?
  • Have any roles disappeared or are fewer needed?
  • How are business and job roles impacted by new ways of working and technology?
  • Where should/can costs be saved?

Depending on the answers to those questions, there are many different options to be considered:

  • Bringing employees back to work on their previous terms and conditions (if that is viable).
  • Keeping some employees “laid off” or on short-time working, if their contracts allow this - although these are not long-term solutions.
  • Changing terms and conditions, with employees’ consent – but employers should be careful of collective consultation obligations if it is likely that 20+ employees will be dismissed and re-engaged.
  • Unpaid leave and sabbaticals are possible but not a long-term solution.
  • Restructures and redundancies - again, bearing in mind collective consultation obligations if 20+ employees are affected.

If employees are brought back to the workplace, businesses should also carefully consider their health and safety obligations, including the best means of reintegrating staff into the workplace and dealing with different working practices.

 

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.

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