Covering employee wages since 1 March 2020, the Coronavirus Job Retention Scheme ("furlough") is set to end on 30 September 2021, with a deadline for final claims to be made by 14 October 2021. Employers still using the scheme should be engaging with employees about its end, and may now need to make some tough decisions that have been postponed while furlough continued.
Current furlough scheme
Since 1 August 2021, the government has paid 60% of furloughed employees' wages, up to a maximum of £1,875 per month. Employers are required to contribute at least an additional 20%, to ensure employees receive 80% of their wages up to £2,500.
Over the last few months, use of the scheme has dropped significantly as restrictions began to ease. By 30 June 2021 there was the lowest number of employees on furlough since the start of the pandemic.
End of furlough
The furlough scheme is set to end on 30 September 2021. Claims for furlough in September must be made by 14 October 2021. At the moment, there is no indication that the UK Government is planning to continue furlough or provide a similar or amended scheme.
Considerations for employers still using furlough
Employers still making use of the scheme should ask themselves questions about the ongoing viability of their business, the number of staff they need, and what cost savings they need to make in order to give their business the best chance of long-term survival. Unfortunately, this means that some employers will be considering reducing staff head count by making redundancies, terminating contracts, and/or offering fewer or no hours to casual staff.
Costs of redundancies
Employers will need to consider their financial position and to factor in the cost of redundancies. Employees who have been continually employed for two years or more will be entitled to a statutory redundancy payment calculated based on their age, length of service and weekly pay. Weekly pay for this purpose is currently capped at £544 per week.
Redundancies can be very costly, so some businesses may find that it makes better financial sense to absorb surplus staff costs for a time in the hope that business will improve. If employers are planning to make employees redundant however, it is important that they take advice and build in enough time for a redundancy consultation to take place before dismissals take effect.
As in any potential redundancy situation, employers who are considering reducing head count should also consider alternatives to redundancy such as redeployment, pay reductions and/or reduced hours.
A number of sectors, such as haulage and hospitality, are experiencing significant labour market shortages at the moment, so employers who can afford to may choose to hold onto staff during the downturn to avoid recruitment issues when things hopefully do pick up.
Employers who are planning to bring employees back to the workplace should also now be engaging with the workforce on how to best facilitate the return to work when furlough ends, which may be quite a shift for employees after so long on this scheme. Government guidance on returning to the workplace in a COVID-secure way, including a number of sector specific guides, are available online.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.