Can I plan for the end of the Furlough Scheme?

One of the questions I am most often being asked just lately revolves around how Employers should plan for the future and to what extent does Employment Law allow for this?

Many Employers have placed staff on the Coronavirus Job Retention Scheme until the promise of an upturn in demand begins to show. In these uncertain times the Furlough scheme provided by the Government offers a little stability and security in a very unstable trading environment.

However, the Chancellor has made it clear that the scheme is not intended to last indefinitely and has confirmed that guidance will be issued within the near future regarding the continuance of the scheme. This poses a headache for a lot of Employers who can see a need for economic mobility, but cannot see any positive movement towards profit for their businesses.

The Government has made tentative suggestions that the scheme will become more flexible and part-time furloughing (which is currently prohibited) will be permitted. More significantly, employers will be required to share the cost. This is a change most businesses need to plan and prepare for.

What seems clear is that the government wants employers to take a more proactive approach about whether they should be retaining their workforce or whether they should be taking steps to make redundancies. The key driver is to avoid a so-called “zombie economy” in which the government is propping up large numbers of employees under the CJRS when, in reality, there is no prospect that their employer will be able to bring them back once the scheme comes to an end. This means employers will need to carry out a difficult analysis about future projections when they will often be entirely unclear about how and when their business will be reopening.

What will the CJRS look like after 1 August 2020?

We will not have an answer until the government guidance is published, but the best guess is that the CJRS will be altered so that the government’s 80% contributions drops, perhaps to 60%, and the employer has to make up that 20% differential. There may also be a gradual tapering off of the government contribution up to the end of October when the scheme is intended to be wound up. This would probably mean an increase in employer contributions.

What do employers need to address now?

There are a number of issues that employers will need to consider now. In particular:

• Are they are in position to make a contribution, once the government subsidy is reduced? If so, will they be topping up to 100% of salary or will they only be topping up to 80% of salary? Depending on the circumstances, this is likely to need further employee engagement and may mean that express employee consent is required if there is going to be a change to what employees are currently receiving.

• Although the new concept of part-time furloughing is undoubtedly sensible and practicable – and indeed there are calls for it to be introduced earlier than 1 August – it is likely to bring with it a number of issues that employers will need to be mindful of. For example, there may be issues in relation to whether there is a contractual right to change an employee’s working hours, which is likely to be more problematic if the employee is not being paid 100% of salary.

• There may also be place of work issues to consider if, for example, an employer is using new or alternative “Covid Secure” premises as a result of the need to implement social distancing. In this case, employers will need to assess their contractual mobility clauses, consult with their people and give them reasonable notice prior to relocating them to new premises.

• There are likely to be two “cliff-edges” when employers would have had to commence a 45-day collective consultation process. The first is likely to be on 16 June 2020, which is 45 days prior to 1 August 2020, when the Scheme will change and some employers will have to contribute towards payments to furloughed employees. The second “cliff-edge” will be 15 September 2020, which is 45 days prior to the end of the Scheme on 31 October 2020. Indeed, these dates may be earlier if an employer has a proposal at an earlier date.

While there is much employers will not know until further details are published at the end of May, there are some issues that they can start considering now. Unfortunately, one of the most significant points for consideration will be assessing how many employees can be retained with a very uncertain future.

Whilst business planning is your business, Zoe Lukic Consultancy can assist with planning redundancies and ensuring that you do not fall foul of laws that protect Employee rights within this situation. Should you need any advice or assistance, please don't hesitate to contact us.