Post Furlough Pitfalls for Employers to Avoid
Douglas Strang outlines how to future proof businesses post-pandemic.
The Coronavirus Job Retention Scheme (or the furlough scheme) has been a lifeline for a huge number of businesses throughout the COVID-19 pandemic. The scheme will end on 30 September 2021. This means that employers need to think now about the future of their businesses and whether any reshaping is required.
Furlough over Summer 2021
From 1 July 2021, the furlough scheme has become more expensive for employers. The Government is currently paying 70% of salaries with employers making up 10%.
In August and September, the Government is only paying 60% of wages with employers having to pay 20%.
Issues for Employers
The aim of the furlough scheme, since its introduction in Spring 2020, has been to protect jobs from redundancies caused by the effects of the COVID-19 pandemic. It has been successful in avoiding redundancies, but with the scheme ending, there is much for employers to consider.
Employers must think carefully about their finances, their requirement for staff, and whether furloughed workers can resume work as before. Ultimately, employers may decide that redundancies or other changes are required.
Redeployment and Changes to Roles
The first port of call for any employers who are unable to bring the entire furloughed workforce back to work should be to look at alternatives to redundancy. Can the problem be addressed by changes to roles, working hours, or pay?
Employers should consider whether employment contracts allow for changes to be made. Ideally, there would be a contractual flexibility clause allowing for a change to be made to an employee’s role or hours, but only rarely will this extend to being able to unilaterally cut pay. The wording of the clause will dictate the changes which can be made. Even if there is such a clause it is important for employers to consult with staff to ensure that any issues are fully raised and explored.
When there is no contractual clause allowing for flexibility, an employer would need to obtain employees’ agreement to any changes being made. Furloughed workers may agree to return to work with a pay cut or reduced hours in the short term if it saves their jobs. There is also the option of using unpaid leave, or temporarily laying off staff (if permitted by the contract).
Fire and Re Hire?
A last resort for changing an employee’s terms of employment when a change cannot be agreed, is the dismissal and re hiring of employees. However, it is important that the employees are consulted on the changes and follow a fair dismissal procedure. The termination will be a dismissal in law and can therefore give rise to an unfair dismissal claim even if the employee accepts re-engagement on the new terms
The collective consultation rules are triggered when an employer proposes to dismiss and re hire 20+ employees in a 90-day period. It is imperative for firms to follow the rules; you may need to arrange for the election of employee representatives.
Employers should also be aware of possible reputational harm, as there has been widespread criticism recently of the “firing and rehiring” on inferior terms, with calls for such a practice to be banned.
Some businesses will inevitably decide that redundancies must be made. Seeking volunteers may be a sensible first step.
Employers need to tread carefully to make sure that due process is being followed for any compulsory redundancies. A fair dismissal process is mandatory (at least where employees have over 2 years’ service). The process should include individual consultation, proper selection pools, and objective selection criteria.
BTO’s specialist Employment Team can assist employers in making tricky decisions about the future of their businesses and the lawful procedure to follow.
This update contains general information only and does not constitute legal or other professional advice.