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What happens when the furlough scheme ends?

The Government’s Coronavirus Job Retention Scheme has been a lifeline to many businesses, with 1.2 million employers claiming for employees’ wages. As the scheme begins to wind down, we go through what employers need to Read more...

Katherine Zangana

Senior Associate

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The Government’s Coronavirus Job Retention Scheme has been a lifeline to many businesses, with 1.2 million employers claiming for employees’ wages. As the scheme begins to wind down, we go through what employers need to be aware of and what options are available to furloughed workers both now and once the scheme is over.  

What’s happening to employer contributions?

As you probably already know, employer contributions begin this month. For August, employers must pay the National Insurance and pension contributions for every furloughed worker. From September, the government subsidy will be reduced, and employers must pay 10% of the furlough grant themselves, increasing to 20% in October. 

If you have furloughed a lot of staff, or if you’ve been topping up furlough pay, these new costs may have a significant impact on your business. You may also be making the most of ‘flexible furlough’ which allows furloughed workers to work part-time. Anyone in this situation must be paid for the work they do at their normal rate.

What options do I have for furloughed employees?

When the furlough scheme comes to an end on 31 October, the government will no longer be picking up any of your wage bill. Therefore, you need to be realistic about who you can afford, for what and when. If you simply don’t have the work or money available, then you’ll be considering what to do with those workers. Any decision you make needs to be clearly communicated and explained.

We go through the various options available to employers below:

  • Return to work

If you don’t want to lose some or all of the workers you’ve furloughed, then you can consider how to bring them back. If it’s viable then the easiest option would be to bring them back full-time, but if there is not enough work available or you can’t afford their full salary, you could consider a different arrangement. This could mean moving them onto part-time work or asking them to take a pay cut. 

Obviously any agreement you come to will have to be mutual, and you will need to be well prepared for any such discussion. Being as open and straightforward as possible is imperative. Every employer who keeps a furloughed worker on through 31 January 2021 will receive a £1,000 grant per worker. Whilst not as financially beneficial as the Coronavirus Job Retention Scheme grant itself, this is still a welcome benefit. An employee must earn at least £520 per month for an employer to be entitled to the bonus, so make sure that any part-time or reduced hours workers still count if you intend to make the most of it.

  • Furlough workers without the government grant

You can keep anyone on furlough for as long as you’d like, as the legal framework is there. However, this will cease to be covered by the government after 31st October, so it’s only a practical solution if you don’t want to lose furloughed workers and are able to foot the wage bill yourself. You won’t need to create any new contractual agreement as they have already consented to being furloughed, but you will need to make it clear to them that they are still a furloughed employee.

  • Redundancy

 We’ve outlined the redundancy process here, but the main things to remember are consulting on the process in line with legislation and how to calculate redundancy pay. On 31 July, the government announced that all redundancy pay must be calculated with pre-furlough wages. If you have already agreed redundancy terms with furloughed workers, then this announcement does not legally apply. 

If you are making between 20 and 99 workers redundant then you need to make sure that the redundancy process begins by 1st October, and by 18th September if you are making more than 100 workers redundant.   

You can continue to claim under the furlough scheme while these employees serve their notice, but, by the time these redundancies are made it will no longer be possible to claim the full amount through the scheme, and you will have to make up the final 20% yourself. 

The bottom line

Whatever you decide to do, the most important thing is to keep dialogue open and current with all furloughed employees. If you envisage a large number of redundancies, then make sure you’re on top of deadlines for when the legal processes must begin. If you think that you can keep all or some of your furloughed workers on, there is a potential £1,000 grant available if they’re still employed until at least 31st January 2021. 

If you would like to discuss any of the topics raised in the above article, please call us on +44 (0)20 7936 8888, email on enquiries@lawstep.co.uk or contact a member of the team below.

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