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Furlough ended yesterday. What next for employers?

The latest data from HMRC shows that, as at the end of July, 1.6 million people were still on furlough. Numbers will have dropped further since then, but it is likely that significant numbers of people will still be affected by the winding up of the scheme today. The furlough scheme has cost the government about £66 billion.

So where does that leave employers?

The reality of the situation for many employers is that they will have to decide whether to bring their employees back into work, whether on the same or different terms, or make them redundant. For many businesses, they will not have the work to sustain pre-furlough staff levels so redundancies may be the only option. If so a fair redundancy process must be followed. This includes genuine and meaningful consultation with staff, on a collective as well as an individual basis where there are significant numbers of employees affected.

Employers are also urged to consider alternatives to compulsory redundancies, including reducing hours, redeployment and voluntary redundancy. Businesses could also consider asking staff to take short periods of unpaid leave/sabbaticals to see if business picks up. A more expensive option, but one which would ensure that staff are retained for better times ahead, and avoid redundancy costs at this point, would be to continue the furlough scheme but self-fund it i.e. the employer pays for it themselves.

Changing terms and conditions may also be an option – reducing pay, reducing hours etc. Generally speaking, even if there is a general right to amend contractual terms, pay cuts/reduced hours cannot be forced through unilaterally by employers, and employee consent is needed to avoid legal claims for breach, or unlawful deduction from wages or constructive dismissal. That said, staff may be willing to accept reduced pay/hours rather than no pay/hours at all.

For all returning employees, whether on old or new terms, some of whom will have been out of the business for 18 months, employers should ensure they are supported and re-inducted if necessary. Employers also need to ensure all reasonable steps have been followed in terms of COVID risk assessments and ensuring a safe place to work.

Ethical redundancies

Exploring all possible alternatives to redundancy has previously been highlighted in a joint statement from ACAS, CBI, and TUC in relation to preparing for redundancy. Further, they’re calling on all employers to get the process right by following five principles – all in line with an ethical redundancy approach.

Do it openly

There are rules for collective redundancies (those involving 20 or more staff), but whatever the scale, the sooner people understand the situation, the better for everyone.

Do it thoroughly

To understand what’s happening, people need information and guidance. Staff representatives should be trained in how it all works.

Do it genuinely

Consultation means hearing people’s views before decisions are made, and being open to alternatives from individuals and/or unions.

Do it fairly

All aspects of redundancy procedure should be conducted fairly and without any form of discrimination. Where employers are reducing the number of roles (i.e. five customer service advisers down to three), and have to select from a pool of staff, be aware that selecting employees for redundancy just because they have been furloughed (over other employees doing the same role but who haven’t been on furlough), could be unfair, and potentially discriminatory (depending on the reasons staff were placed on furlough e.g. if they are in a vulnerable group).

Do it with dignity

Losing your job has a human as well as a business cost. Businesses should think about how they will best handle the conversation. For more help and guidance on doing redundancies ethically, please see our blog series here or listen to our podcast.

Redundancy costs

Employees with at least 2 years’ service have protection from unfair dismissal (including unfair redundancy process/selection), and will be entitled to Statutory Redundancy Pay, in addition to notice and unpaid accrued holiday.

Furlough payments cannot be used to substitute redundancy payments. Redundancy payments should be calculated on the basis of an employee’s pre-furlough salary (and not the 80 percent reduced rate). Furloughed employees are entitled to notice as usual, and furlough payments can’t be claimed for any employee serving their notice.

Job Support Scheme

The Job Support Scheme (the replacement for the furlough scheme) was postponed back in November 2020 because of the extension of the furlough scheme at that time. The government has since announced that a new retention incentive scheme alternative would be introduced but there have been no announcements about this as yet…..

Our employment law experts have many years of experience in advising businesses on redundancy procedures, employment contracts and policies. If you wish to speak to one of our employment lawyers call 0808 252 5231 or request a call back online at your convenience.