The furlough scheme has entered its final two months. The scheme has cost an estimated £64 billion and supported around 11.6 million jobs since its inception on 20 March 2020. At its peak in January of this year, it is estimated that some 5.1 million workers were on the furlough scheme.
The scheme has been gradually changing and winding down over the last few months, with employer’s contributions incrementally increasing. Since 1 July 2021, employers have had to contribute 10% of a furloughed employee’s wages and all national insurance contributions, while the Government pays for the remaining 70%.
This was reduced further to a 20% / 60% (up to a maximum cap of £1,875 for the hours the employee is on furlough) split between the employer and HMRC for the months of August and September 2021.
Key industries such as hospitality and aviation are still trying to return pre-pandemic output, with the aviation sector in particular struggling to plan for the future with the changing red, amber and green travel destination lists.
Bringing furlough to an end
Employers should adopt an open approach to the end of furlough and discuss their plans and potential dates for ending the scheme with employees to allow them to raise any concerns they have in advance. Employees returning to work should also be given written notice of their return. There is no set minimum notice period for ending furlough, unless one was previously agreed as part of an employee’s furlough agreement.
Uncertainty about the future is also filtering through to business owners in these key industries, as evidenced by a recent survey by the British Chamber of Commerce. The survey, which reached out to over 250 businesses, found that as employer contributions increase to 20%, nearly 1 in 5 of those surveyed stated they would make need to make staff redundant to survive.
Whilst they have revised their 2021 growth forecast from 5.7% to 6.8%, their analysis also estimates that the end of furlough will increase unemployment by 150,000, a not insignificant figure.
Some relief for employers will remain. For example, those in the leisure, retail and hospitality industries have been offered 66% relief on business rates until March 2022. However, in the absence of a further extension or additional support announcement, the end of furlough will force business to make tough employment decisions.
If an employer does choose to make redundancies, they could consider first asking for volunteers to reduce or avoid compulsory redundancies. Employers should also ensure they have assessed whether those at risk of redundancy could be redeployed into an alternative role. At all stages, employers should take care to follow a fair process and comply with all obligations, including to inform and consult with the affected employees.
Alternatives to Redundancy
Making employees redundant is not a decision employers take lightly, and as the scheme winds down, employers should give consideration to alternative options. This could include putting a freeze on recruitment or looking at reducing existing employees’ hours but note any reduction in hours will need the agreement of the employee before being implemented. Another option could be reducing the discretionary, non-contractual benefits, or securing the employee’s agreement to reducing or removing a contractual benefit.
If you have any questions in relation to furlough, redundancy or restructuring, please contact our employment lawyers for advice.