End of Furlough: What Businesses Need to Consider
The government furlough scheme is now set to end on 30 September 2021 and, absent a serious third wave of covid-19 in the UK, it is unlikely to be extended again. This means businesses must take stock and decide how they will respond.
While there are businesses who have weathered the storm well, and firms who have been fortunate to have been untouched by the economic fallout of covid-19, there are thousands of businesses who have only stayed afloat because of the government’s covid-19 emergency business measures.
According to the government, 11.2m jobs have been protected by mid-February through the furlough scheme (formally, the coronavirus job retention scheme) at a cost of £52.8 billion.
Under the furlough scheme, government covers up to 80 per cent of an employee's salary for the hours they can't work (to a maximum of £2,500 per month). From July, the government subsidy will be tapered down to 70 per cent of the employee’s salary and the employer must contribute 10 per cent for hours not worked. Then for the final two months of the scheme, government will pay 60 per cent and employers will pay 20 per cent for hours not worked.
The government ‘roadmap’ out of lockdown is expected to see the economy open in full in the summer – hopefully by 21 June. So where does this leave businesses needing further financial support?
A Job Support Scheme (JSS), once intended to go live at the end of the furlough scheme, has been withdrawn. Likewise, the one-off job retention bonus for employers of £1,000 per furloughed employee has been shelved (neither have been replaced).
However, ‘viable’ businesses can apply for a loan of between £25,001 and £10m under the new Recovery Loan Scheme.
Businesses in the hospitality and leisure sector in England can apply for a one off ‘restart grant’ of up to £18,000 and business rates relief will continue for eligible businesses in retail, hospitality and leisure.
Risk of disputes
But despite additional funding being made available to the business community, the reality is that many businesses will still be facing the prospect of making people redundant. Those businesses must ensure they play by the book when considering their next move as the ending of the furlough looms, otherwise they risk a legal dispute.
It certainly seems inevitable that a wave of redundancy claims is coming and the backlog of cases in the employment tribunals will worsen. The backlog is already rising: according to the latest data from HM Courts and Tribunals, the number of outstanding employment tribunal claims soared to 51,614 by 11 March 2021 – a 45 per cent increase on the pre-covid-19 baseline figure of 35,653.
Redundancy will be a major issue facing many businesses. Furloughed employees are not protected from redundancy where a genuine redundancy situation exists. However, businesses considering redundancies must follow the correct rules on redundancy selection and pay to minimise the risks of disputes.
Alternatives include reducing hours and or pay for some employees, though their formal agreement must first be obtained and recorded. Employers cannot unilaterally change key terms of engagement without risking problems.
We strongly recommend businesses take specialist legal advice before taking any redundancy-related steps with their workforce.
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