The Coronavirus Job Retention Scheme, otherwise known as the furlough scheme, was intended to save jobs and livelihoods during the pandemic and allow employers enough time to financially bounce back and bring their furloughed employees back to work and pay wages in full.
We know that the Government will reduce its contribution towards wages under the ongoing furlough scheme for August and September to 60% and employers will pay 20% (more if they have agreed to top up employees’ wages).
The scheme and all Government contributions are due to end on 30 September 2021. Data suggests that approximately just under 2 million employees remain on furlough leave as of July 2021. Some employers will be in a position to welcome back staff to their previous roles and be able to pay 100% of their wages once again. Unfortunately, other organisations will not have financially recovered enough to be able to do so.
As we get closer to discontinuation of the scheme, employers should consider how they will manage employees and whether they may need to restructure their staffing requirements to fit with the new economic environment. Employers will need to start thinking now about what will happen to those employees who remain on furlough.
In this article, we outlines the main considerations that employers will need to address over the coming weeks and months, and what employers should consider if they are planning redundancies after furlough.
When to bring an end to furlough leave.
Every employer with furloughed employees will need to make a decision as to when they will end each employee’s furlough leave based upon the needs of the organisation.
Some of the key considerations will be:
1. Which roles are required back first?
2. Which employees should remain on furlough due to specific circumstances, such as health or child care issues?
3. The increased cost of the furlough scheme and reduction of government assistance up to 30 September 2021.
Communication and Notice.
Clear communication with staff on furlough has,and will continue to be crucial. Employees on furlough leave may well feel isolated, so employers who are open and transparent with staff on furlough leave will help them feel informed and included.
Employers will need to ensure appropriate notice to end furlough leave is given in line with any furlough agreement or letter that was sent to the employee to put them onto furlough in the first place.
Integration back into the workplace.
Employers will need to consider how best to integrate staff who have been on furlough leave back into the workplace, some of whom may be anxious about a return after such a long period. They will need to make sure employees have been informed that a COVID-19 risk assessment has been undertaken and informed of measures put in place to mitigate the risk of COVID-19 infections in the workplace. Doing this will hopefully go a long way to allaying any concerns furloughed staff have about returning.
Many employers have put in place flexible, or hybrid working schemes to meet the aspirations of employees towards maintaining some of the flexibility they have enjoyed during the pandemic. Employers should also update those who have been on furlough leave about any flexible working arrangements that have been put in place. Employees on furlough leave will have the right to make a request for flexible working under the statutory scheme provided they are eligible by being continuously employed for 26 weeks or more. The scheme is set out in sections 80F to 80I of Employment Rights Act 1996 (as amended) together with the Flexible Working Regulations 2014 (SI 2014/1398).
Changes to terms and conditions of employment.
Importantly, a key consideration for employers will be whether they are in a financial position to welcome the employee back to their role. It may be that cost cutting measures are still required after the furlough scheme ends.
If employers need to consider a permanent or temporary change to terms and conditions of employment, such as a reduction in pay, any changes to employees’ terms and conditions of employment will require employee agreement and will need a period of consultation. If the organisation recognises a Trade Union (TU) then pursuant to the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) the TU will have to be involved in any consultations. If no TU is recognised consultation can take place on an individual or group basis by agreement with the employees. If it becomes necessary to try and agree a reduction in pay as an alternative to redundancies, where possible and realistic present such changes as a temporary arrangement which will be reviewed after an agreed period of time, for example, six months. Unilateral changes to employment terms and conditions may give an employee the right to raise a grievance, work under protest, or resign and claim constructive unfair dismissal in the Employment Tribunals, which not risks adverse publicity, such claims can be costly to defend and may also affect employee relations.
Many employers will have left employees on furlough leave in the hope that activities will have picked up by September and they can avoid making redundancies. Unfortunately, the reality will be for many employers that there is still a reduced need for staff, a reorganisation of skill sets or worse case a need to close workplaces or business altogether, and that redundancies will become a necessity.
Furloughed workers have the same legal rights as any other employee. This means that the same protections apply in relation to unlawful discrimination and unfair dismissal. Any redundancy must be genuine and fair, with due process followed. This applies to both furloughed staff and working staff.
Employers should consult with employees on furlough,but need to consider the practicalities of this. For example, by ensuring that the meetings take place in a format with which the employee is comfortable, and that their right to be accompanied by a colleague or a trade union representative is respected. Trade union services are in demand, so it may be several weeks or longer before a trade union representative is able to attend an individual or collective redundancy consultation.
Multiple redundancies at one establishment
If an employer is proposing 20 or more redundancies at one establishment, it will normally need to undertake collective consultation as well as individual consultation (there is a special circumstances defence where consultation is not reasonably practicable, but this is interpreted very restrictively by the Employment Tribunals). Collective Consultations will involve careful planning, electing employee representatives (if suitable ones are not already in place), and consulting with them regarding various matters related to the proposals for at least 30 or 45 days (depending on the numbers involved). The employer is also required to notify the Redundancy Payments Service ahead of starting consultation, or else face a potentially unlimited fine.
What are the discrimination risks employers face?
Whilst an employer may be inclined to consider staff on furlough pay for redundancy above looking at other employees, employers should bear in mind that usual discrimination protections apply.
Employers should take extra care when considering roles which are occupied by disabled workers. This may include workers with long-term health conditions that fall within the definition of a disability under the Equality Act 2010. A recent Office for National Statistics report found that disabled employees were significantly more likely to be made redundant over their non-disabled colleagues.
In addition, reports indicate that women make up a disproportionate amount of the numbers on furlough leave, leaving open the possibility for discrimination on the grounds of sex.
What are the possible alternatives to redundancies?
Depending on the needs of your business, there may be alternatives to letting staff go.
• Could your organisation institute a hiring freeze?
• Could you redeploy staff from one area of the business to another?
• Could you delay wage increases?
• Could you look at a agreeing a temporary percentage reduction in pay and/or hours across with your workforce (ensuring, for employees on low pay, that rates do not fall below the National Minimum Wage)?
• Are there any provisions in the contract of employment that might help, for example a contractual right to lay-off without pay?
• Could you continue a flexi-furlough scheme after the official scheme has ended? You will not be able to reclaim payments, but there are advantages in retaining staff in this way if business will increase and it may be difficult and/or expensive to recruit.
Considering alternatives makes commercial sense, but it will also assist an employer in demonstrating that the redundancy is genuine and the process is fair.
It will be crucial that employers take legal advice especially when considering changing terms and conditions of employment or commencing a redundancy process. This will reduce the risk of claims being brought against the organisation in the Employment Tribunals.
Furlough leave was unchartered territory for employers, those working in employment law and HR, and of course those employees who were furloughed. Employers will now need to manage the scheme’s ending to mitigate the financial impact of the pandemic on their organisation.
If you would like to discuss any of the issues raised in this blog please get in touch.