Jim Lister, Partner at BLM Solicitors examines the latest changes to the government’s furlough scheme, and how it fits with change planning.
There is no doubt that the government’s coronavirus job retention scheme (JRS) has had a huge impact; 1.1 million employers have furloughed 9.3 million workers. Getting these people back to work is the government’s next challenge.
From 1 July 2020, the JRS scheme was modified, in order to allow employees to return to work on a part-time basis, but still to receive furlough payments. The scheme is highly flexible, and allows for even one or two hours work per week to be carried out, with the government continuing to pay furlough for the non-working hours, while the employer picks up the cost of the working hours, still subject to a limit of 80% of normal salary, capped at £2500 per month.
From 1 August 2020, employers will begin to share the cost of furlough. During August, employers must pay the employer’s NIC and employee pension contributions, and in the months following that, the government will reduce payments to 70% during September and 60% during October, again with the employer picking up the balance. The scheme will end in October 2020.
As the cost of furlough to employers begins to increase, and the end of the scheme comes into sight, employment lawyers are receiving a lot of questions about the scheme, and how it affects restructuring plans. Here are the answers to some of the most common questions we receive
I’ve heard that the rules of the flexible JRS of changed and that I can only claim furlough for employees who I intend to retain. Can I still claim where I know that employees will be made redundant?
A number of media outlets have highlighted a paragraph in the latest guidance relating to the flexible JRC which appears to limit furlough to situations in which it is “used by the employer to continue the employment of employees”. The Telegraph reported that “employers may be forced to return cash as Sunak redefines furlough”
Is there any truth in this? No, not in our view. The detailed rules of the scheme are largely unchanged and the government has not attempted to modify or withdraw very clear guidance previously issued that furlough may be used where it is known that the individual concerned will not be retained.
What about holidays? Can I instruct my staff to take holidays while they are on furlough and reduce my overall holiday bill?
Up to a point; the new guidance on flexible furlough suggests that there is nothing to prevent you from directing employees to take holiday while they are on furlough, so long as you top it up to 100% of salary. The new guidance does specifically prevent the practice of placing employees on flexible furlough because they have booked holidays.
I can’t keep on any of my furloughed staff – can I just make them redundant? Is there anything specific that I need to take into account?
Many furloughed employees have less than two years’ service, and so do not have any right to redundancy pay or to complain about unfair dismissal. Lots of employers are making staff such staff redundant without any procedure at all, and that is generally safe and perfectly permissible.
You can make staff redundant while they are on furlough. If they have more than 2 years’ service, you still need to go through ACAS procedures, which will generally take two to three weeks. Many staff will have been chosen to go on furlough without any real objective evidence-based assessment, and while that is in itself probably justifiable, employers should be careful if the people that they select for redundancy appear to be automatically those who were placed on furlough. This may create the impression that preselection has taken place. Don’t fall into the trap of thinking that redundancy selection is more likely to be “fair” simply because the individuals concerned were on furlough at the time, particularly where he or she is part of a pool, some of whom were not placed on furlough.
If I make someone redundant, can I claim furlough for their notice period?
Providing the employee is served with notice, and remains employed during the notice period (rather than being paid off in lieu of notice) a claim can still be made for their salary during this furlough period. There is a degree of controversy amongst lawyers as to whether pay should be “topped up” to the full 100% during the notice period, and this seems a strong argument that it should be, particularly where the individuals concerned receive only contractual minimum notice under their contract As a matter of good practice, many employers are choosing to top up to 100%, regardless of whether the law requires that or not.
There are strong arguments that employees who are entitled to more than statutory minimum notice do not need to receive the top-up.
Can I justify redundancy, when flexible furlough is available?
Generally, employers are only justified in making an individual redundant when there is no viable alternative. While the government is willing to pay furlough, even where employees are carrying out a minimal amount of work, it could be argued that there is no need to make individuals redundant until the furlough scheme has come to an end. However, we do not take the view that employers will be able to justify redundancy even during the flexible furlough scheme period, providing that the employer has carried out a reasonable assessment of their future needs, and has established that a particular individual is not required in the longer term.