Despite the support provided by the Coronavirus Job Retention Scheme ('CJRS'), the Covid-19 ('coronavirus') pandemic is continuing to put many businesses under considerable strain. Many employers consider that they will inevitably have to make redundancies at some point. The extension of the scheme to October 2020, the introduction of flexible furloughing from July 2020 and mandatory employer contributions from August 2020 further complicates the picture.
Some employers are questioning whether they can, or should, make redundancies now, and whether they can start redundancy processes in relation to employees who have been furloughed. Some of the difficulties arise from the fact that the CJRS has been introduced by means of a Treasury Direction and various iterations of Government Guidance. These documents are not as detailed as legislation and are not all wholly consistent with each other or with earlier versions of the guidance.
To assist you in making these difficult decisions, we have set out some of the questions we are being asked most frequently with our thoughts as to the answers.
Frequently asked questions
- How is the CJRS going to be evolving over the next few months?
- When does the CJRS close to new applications?
- How will part time furloughing work?
- Will it still be possible to rotate employees through furlough?
- What employer contributions will be needed and how will they be calculated?
- How do we decide who to keep on full time work, part time work and full time furlough?
- If I have decided that I will not need certain roles or will not be able to afford them when we return to normal, or cannot afford the contribution to furloughed employees' pay as the rules change, can I make redundancies now?
- Can I include furloughed employees in selection pools for redundancy?
- How do you carry out consultation (individual or collective) in a way that is fair and lawful when you cannot meet face to face?
- Is a trade union or elected employee representative 'working' if they carry out their duties during furlough?
- Can notice run concurrently with a furlough period?
- Can notice and redundancy pay be claimed from the CJRS?
- What other alternatives are there to redundancy and does furlough affect any of them?
How is the CJRS going to be evolving over the next few months?
There will be changes in three main areas:
- The CJRS will close to new entrants on 30 June 2020 and close altogether on 31 October 2020. In practice no-one who has not been furloughed before will be eligible to be furloughed after 10 June 2020;
- Greater flexibility will be introduced from 1 July 2020, involving shorter furlough periods and the potential for part time work alongside furlough payments;
- You will be required to make graduated financial contributions from 1 August 2020.
When does the CJRS close to new applications?
The CJRS scheme will close to new entrants on 30 June 2020. However, in order to ensure that a minimum three week furlough period is completed by that date, in practice you will not be able to furlough anyone for the first time after Wednesday 10 June 2020.
The government fact sheet accompanying the announcement on 29 May 2020 appears to confirm that this deadline only applies to those who have never been furloughed before, and if that is correct, this will not prevent you rotating staff in and out of furlough after that date, provided they have been furloughed for the first time no later than 10 June 2020. You will have until 31 July 2020 to make any claims in respect of the period to 30 June 2020.
The scheme will close in its entirety on 31 October 2020.
How will part time furloughing work?
From 1 July 2020, you will be able to bring furloughed employees back to work part time. This is a month earlier than suggested in previously announcements. It will be up to you to decide the hours and shift patterns your employees will work on their return, and you will be responsible for paying their wages and applicable tax and NICs while they are in work in accordance with the provisions of their contracts. The minimum furlough period will be reduced to one week.
You will be able to claim a furlough grant for the hours your employees are not working calculated by reference to their usual hours worked in a claim period. Both hours worked and normal hours will need to be reported.
To be eligible for the grant you will need to agree the new flexible arrangement in writing with the employee. Further details of how part time furloughing will work will be included in further guidance published on 12 June 2020 and this article will be updated accordingly.
Will it still be possible to rotate employees through furlough?
This appears to be the case from the government fact sheet, although the point is not addressed explicitly. In our view, it would be unexpected for the government to prohibit rotating staff in and out of furlough without clearly stating its intention to do so. It would also be difficult to reconcile with its having reduced the furlough period to a minimum of one week rather than three and its objective of offering maximum flexibility.
What employer contributions will be needed and how will they be calculated?
In June and July 2020, you will not to be required to pay anything.
From 1 August, the government will continue to pay 80% of wages up to a cap of £2,500. However, as an employer, you will now pay employer NICs and pension contributions - for the average claim, this represents 5% of the gross employment costs you would have incurred had the employee not been furloughed. You may top up further if you wish to do so.
From 1 September, the £2,500 cap will still apply. The government will pay 70% of wages up to this capped amount (a maximum of £2,175.50) and you will be required to pay employer NICs and pension contributions and 10% of wages (up to a maximum of £312.50 unless you choose to pay more). For the average claim, this represents 14% of the gross employment costs that you would have incurred had the employee not been furloughed.
From 1 October, the £2,500 cap will still apply. The government will pay 60% of wages up to this capped amount (a maximum of £1,875) and you will be required to pay employer NICs and pension contributions and 20% of wages (up to a maximum of £625 unless you choose to pay more). For the average claim, this represents 23% of the gross employment costs that you, as an employer, would have incurred had the employee not been furloughed.
How do we decide who to keep on full time work, part time work and full time furlough?
If there has been a downturn in work, meaning that some employees are under-utilised, any decision about how to deploy staff given the range of options available may not be straightforward. The decision should reflect the objective needs of the business at the relevant time, taking into account your obligations to act fairly and reasonably and in accordance with the implied term of trust and confidence, and not to discriminate against employees who have protected characteristics such as pregnancy or disability.
Acting in a fair and non-discriminatory way is likely to entail consultation with employees and the need to take into account their individual circumstances. You should not, for example, assume where work levels are reduced, that you can simply furlough employees who are due to return from maternity leave in preference to those who are not on leave. Similarly employees returning from periods of sickness absence should be consulted and you should not assume that they can be placed on furlough, if there is work that could be allocated to them.
Although coronavirus has created extraordinary challenges for employers, the statutory rules that apply to the employment relationship have been left more or less unamended (with the exception of the rules on the carry-over of unused holiday). Any decision that affects an employee's pay, status working arrangements or job content needs to be taken in accordance with the existing statutory rules, as well as the express and implied terms of the employment contract, (including the implied term of trust and confidence).
If I have decided that I will not need certain roles or will not be able to afford them when we return to normal, or cannot afford the contribution to furloughed employees' pay as the rules change, can I make redundancies now?
If it is clear that your business will not be sustainable in the future without closures or staffing cost reductions, the fact that employees are currently furloughed does not prevent you from starting to plan for redundancies.
Redundancy dismissals will need to comply with the rules on unfair dismissal and equality legislation and, if you are proposing 20 or more redundancies at one establishment within a 90 day period, you will also need to follow the rules on collective consultation.
There is an argument that an employer should at least consider allowing an employee to remain on furlough until the end of the CJRS as an alternative to making redundancies. However, each case will turn on its own facts and if a job has genuinely disappeared as a result of the pandemic it would not be wrong to make redundancies before October 2020, particularly if they are required as part of an overall restructuring that is needed to keep parts of the business viable. The fact that you will need to start to contribute to the cost of the CJRS from August will be a relevant consideration.
Can I include furloughed employees in selection pools for redundancy?
The fact that an employee is furloughed does not mean that you cannot include them in a pool for redundancy selection.
Redundancy selection should be carried out in the usual way, using fair and objective criteria that are applied reasonably in a transparent process. You should exercise caution however about using only furloughed employees in your selection pool as the process for identifying those who would be furloughed might have been conducted at some speed and might not stand up to scrutiny as part of a fair redundancy selection process. A better approach would be to consider all those doing similar work, whether furloughed or not.
How do you carry out consultation (individual or collective) in a way that is fair and lawful when you cannot meet face to face?
Both individual and collective consultation assume that there will be at least some face to face communication. You will need to consider the particular features of your own workplace and some creativity may be needed, but there is no reason in principle why consultation should not take place using technology if physical meetings are unsafe, inappropriate or impractical.
There may be more of a challenge if your business is one in which employees do not routinely have access to computers - businesses in the construction, retail, manufacturing and hospitality sectors might all fall into this category. However, many employees will have IT equipment of their own and you should discuss with them ways in which you can conduct confidential meetings using video platforms, or even telephone calls if no other option is available, at times that take into account employees' own circumstances and enable meaningful consultation to take place.
Collective consultation requires that you allow the appropriate representatives access to the affected employees and provide them with such 'accommodation and other facilities as may be appropriate'. This could be challenging in workplaces where it is not practicable to provide the means for the necessary communications to be carried out electronically, and arrangements cannot be put in place for in person meetings to be conducted safely. As an employer, you should do what you can to facilitate access, providing technology where possible or discussing potential solutions with the representatives.
Please note - it is not advisable to dispense with consultation because of the challenges presented by the current situation and restrictions on communication, movement and travel.
Is a trade union or elected employee representative 'working' if they carry out their duties during furlough?
The terms of the CJRS and guidance issued under it make clear that trade union and elected representatives can carry out their duties without breaching the current requirement that no work is carried out for the employer during the furlough period.
Can notice run concurrently with a furlough period?
There is no reason why you should not serve an employee on furlough with notice of termination of employment to run concurrently with a period of furlough (in whatever form, including rotating or flexible furlough).
Can notice and redundancy pay be claimed from the CJRS?
Payments in lieu of notice are not recoverable from the CJRS, and you may therefore prefer to keep employees who are furloughed and going to be made redundant, on furlough during the notice period so that at least some of the notice pay can be recovered via the CJRS grant.
The starting point for calculating recoverable notice pay will be the contract of employment. The amount that will need to be paid and the amount that you will be able to recover from the CJRS may be affected by:
- whether the contract provides for statutory notice only or for a period at least a week longer than statutory notice;
- whether the employee's pay varies with the amount of work they do;
- whether you have agreed to top up the CJRS grant in some way;
- any other changes to the contract made by the furlough arrangement; and
- the month in which you are making the payment.
Redundancy payments are not recoverable from the CJRS grant and will need to be met from your own funds.
What other alternatives are there to redundancy and does furlough affect any of them?
You may be considering alternatives to redundancy such as recruitment freezes, withdrawing job offers, restructuring roles so as to avoid job losses, reducing working hours, reducing pay or offering sabbaticals and other periods of unpaid leave.
The fact that some or even most of your staff are furloughed will not in principle prevent you from taking any of these steps as a way of avoiding job losses. All of them will however require communication and some of them will require formal consultation, particularly if they can only be implemented via changes to the contract of employment and/or involve more than 20 employees whose contracts might be terminated as part of a restructuring process (in which case collective consultation will be required).
Each situation will require careful thought and, depending on the type of workplace and the extent to which employees are already returning to work, creativity about how the necessary meetings and discussion can take place. See also the answer to 'How do you carry out consultation (individual or collective) in a way that is fair and lawful when you cannot meet face to face?'
Originally published 08 JUNE 2020
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.