The end of the Job Retention Scheme | What happens once furlough ends?
The information in this blog is correct as at 11 May 2020. For the most up-to-date Employment Law and Health & Safety advice to support your organisation through the COVID-19 pandemic, visit our Coronavirus Advice Hub, which is updated daily and contains a variety of free guidance notes, letter templates, checklists, risk assessments and more.
The government is now paying the wages for nearly a quarter of UK jobs – but at an estimated cost of £40 billion over three months, the Job Retention Scheme cannot continue indefinitely. So what happens next?
As it stands, the government is expected to pull the plug on funding on 30 June. However, with only a vague indication as to when businesses can expect to reopen, and any projected dates conditional on five tests being met, employers are naturally concerned about support running out before they are given the green light to return.
With the future of scheme uncertain, there has been much speculation about how things may wind down, with some suggesting that employers and employees will need to be “weaned” off their furlough “addiction”. Whilst such language is unhelpful – firms were encouraged to use the scheme and the economy would be in ruins without it – the reality is that the government cannot foot the bill forever.
Most agree that withdrawing the scheme overnight could have catastrophic consequences, and business groups have urged the government to proceed with caution. Adam Marshall, Director of Policy and External Affairs at the British Chamber of Commerce, said: “Firms will also need to know that government support schemes, which have helped save millions of jobs in recent weeks, will continue for as long as they are needed so that they can plan ahead with confidence.”
Thankfully, the Chancellor has confirmed that there will be no “cliff-edge” end to the furlough scheme. That said, businesses should expect modifications over the coming weeks and months. Until an announcement is made, it is impossible to say for certain what form these changes will take; however, in the absence of any definitive answer, speculation has been rife.
Here are three potential options for the future of the scheme.
1. A smaller subsidy, or a lower cap?
A number of sources have reported that the government could extend the scheme until September but reduce the amount that can be claimed, either by cutting furlough payments from 80% to 60% or lowering the maximum limit of £2,500. These appear to be the leading options at present, with the majority of commentators placing their bets on the government announcing one or both of these amendments in order to keep costs under control.
The obvious problem with this approach, of course, is that it assumes business can afford to make up the difference, which is far from guaranteed. In addition, most furlough leave will have been agreed on the basis of the scheme’s rules as they stood at the time, so any reduction in amounts would require further agreement and changes between employer and employee.
2. Allow short-time working?
A more popular and perhaps more sensible idea that has done the rounds lately is to allow employees to undertake some work while furloughed. Under current furlough rules, employees are prohibited from doing anything that generates revenue or provides a service to their employer whilst claiming under the scheme. Allowing some work to be carried out would help to reduce the burden on the government and allow businesses to respond as demand gradually picks up.
Labour leader Sir Keir Starmer, who has called for an urgent revamp to the furlough scheme, has advocated a similar approach: first, to create a category of ‘semi-furloughed’ people who can work part-time, while extending the scheme for companies stuck in long-term lockdown.
In a similar vein, some have floated the idea that the minimum furlough period of three weeks could be reduced, which would have similar benefits.
3. Introduce sector-specific rules?
It is apparent that certain sectors of the economy have been hit harder than others, namely those within the hospitality, leisure and travel industries. Despite the government suggesting that parts of the hospitality industry and more shops could open from July, the Prime Minister was careful to stress that this is all dependent on the data, and it may still be months before these businesses are allowed to operate anywhere near full capacity.
By comparison, those in the professional services industry that are better able to accommodate homeworking, as well as some logistics, manufacturing and essential retail businesses, have not been as severely affected. With this in mind, it may be sensible to allow businesses in the most impacted sectors to receive more support for longer.
A decision on axing the scheme is expected this weekend.
Director of Legal Services
Whatever route the government decides to take, the Chancellor will need to act fast and make announcements before 17 May as the window for collective consultation narrows.
If an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, they will need to consult about the dismissals with appropriate representatives of any of the employees who may be affected. The consultation must begin in good time and the law requires any employer who is proposing to dismiss 100 or more employees to start this process at least 45 days prior to the first dismissal. This means that, if an employer is to dismiss at the end of the scheme (currently 30 June), they will need to begin consultation by 17 May at the latest.
If you are proposing to dismiss between 20 and 99 employees, the protected period is shorter – 30 days prior to the first dismissal.
It is worth noting that the requirement to consult does arise pretty early on. There has been much case law about what is meant by “proposing” to make redundancies, but it is generally held to occur at an earlier stage than an actual decision by the employer to make redundancies.
Keep in mind also the requirement to consult with appropriate representatives. In the current climate, it would probably be easier if there was a recognised trade union for this purpose, but in most workplaces, you will be looking at either a standing body of employee reps or you will need to hold an election to appoint some. Given the current lockdown conditions, holding such an election is easier said than done but you should note that the consultation period cannot begin until the reps are in place and certain statutory information has been provided to them.
To support employers through potential COVID-19 redundancy situations, we have produced a simple FAQ on collective consultation rules that can be accessed for free via our Coronavirus Advice Hub. We will continue to update and review this document as more information is in the coming weeks.
Experienced employment support through COVID-19
Whether you are facing a redundancy situation, contemplating re-opening or awaiting the next phase of furlough, our Employment Law specialists can help you to manage your people responsibilities in line with the law and government guidance, and make informed, commercial decisions about the future of your workforce.