The End of Furlough and What to Consider

Eighteen months ago, most people wouldn’t have been able to tell you what the word furlough meant. However, a lot has changed in that time. After multiple extensions and amendments to the scheme – Officially referred to as the Coronavirus job retention scheme we all know precisely what it is, and now it’s finally due to end on September 30th 2021. 

If you are considering what steps to take as the scheme draws to a close, you are certainly not alone. In July 2021, 484,000 employers still had staff on furlough (amounting to 1.6 million employees) or flexible furlough (where staff members can be furloughed for some of their hours.

As an employer, you may be wondering what happens next and how to manage your employees return to work and the financial implications of bearing the full cost of their pre-pandemic wages looms. Here we look at how you can prepare for the end of the furlough scheme and the options now available: 

Get Employees back in the workplace.

In an ideal world, this is the best solution for everyone. It’s easy to implement and makes sense if you want to retain your top talent, and your financial forecasts look good as we return to normality. However, it is the most expensive option as you would need to revert to paying their monthly salary in full.

The actual process of bringing back an employee should ideally have been pre-agreed in their furlough agreement when the scheme was first implemented. If it wasn’t, you should give your employee reasonable written notice that they are being brought back from furlough and put steps in place to facilitate their return to work. Furloughed staff may have felt isolated, so being open and transparent about their return will help them feel informed and valued. After being at home for so long, your employee may need time to acclimatise to office life again. You may want to consider some refresher training, a gradual return to work plan or adjusted hours for a short time.

Making Redundancies

It’s never ideal, but unfortunately, when costs need to be cut, the tough decision to reduce headcount is required as a last resort. You may have left your employees on furlough with the expectation your business may have picked up by September, and you would welcome them back. However, if the pandemic and your recovery have highlighted that fewer staff are required, or a business restructure and departments or branches are set for closure, redundancies could be inevitable.

Furloughed employees have the same legal rights as any other employee, and you should follow the same process. Any redundancy must be genuine and follow a fair procedure. If any redundancy occurs in the last month of furlough, you should make some specific considerations.

These include:

  • Furlough pay can not be used to make any redundancy payment.
  • Furlough employees are entitled to notice as usual. However, employers cannot claim any furlough grant for employees service statutory notice.
  • Identify your redundancy selection pool fairly, for example, employees who carry out the same roles. Making a pool purely of furloughed employees for no other reason could be considered unfair and discrimination.

Reduce Costs Without Redundancies

Having a reduced payroll cost with the assistance of the furlough scheme could well have been a lifeline for your business during the pandemic. However, suppose your company has been hit hard or not expecting a quick economic recovery. In that case, you may want to consider how you can reduce payroll costs without the need for redundancies or losing those valuable employees.

Here are the options available:

  • Bringing employees back on reduced hours and pay

If you don’t currently need full-time staff, this could be an option that works for you and your employee. However, you’ll need to agree on the changes with your employee and receive their consent to change the terms and conditions of their employment.

  • Asking employees to take unpaid or part-paid leave

If you need more time for your business to recover financially, you may want to consider asking your employees to take unpaid leave as furlough ends. This agreement would need to be made voluntarily, and you should set any agreement out in writing, stipulating the terms and the right to decline requests for unpaid leave if the business requires those functions.

  • Extending furlough without government assistance

If you do not currently have enough work but want to keep your employees for when business returns to normal, you could decide to fund the furlough pay internally and even rotate staff in and out of furlough. Doing this could avoid the costs associated with redundancy. The process for doing this would be similar to those employees looking to reduce employee hours and pay. Of course, you’ll also need to provide a new furlough agreement.

The end of furlough poses multiple challenges for employers still heavily affected by the coronavirus pandemic. We hope some of the information above assists you in making some informed decisions on bringing your employees back to work later this month.

To discuss your HR needs or to arrange for us to come in and support you, give us a call.

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