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Insights

Is your business ready for life after furlough?

Posted on 24th April 2020 in Employment, Coronavirus Pandemic

Posted by

Joanna Parry

Solicitor
Is your business ready for life after furlough?

The good news is that the Coronavirus Job Retention Scheme (CJRS) has been extended and will now run until 30 June 2020. But what happens when it ends?

With lockdown in place until at least 8 May 2020, we understand the financial uncertainties you may be facing. As things currently stand, you will have to start paying your furloughed employees their normal salary from 1 July 2020. If you think you will struggle, now is the time to start planning how to deal with this. Here, we set out some options you may want to consider.

 

Holiday

The government has recently confirmed that holidays can be taken whilst on furlough. If holiday is taken during furlough, employers will be obliged to 'top up' to 100% of normal pay. You may want to think about requiring your employees to take part of their holiday entitlement:

  • whilst on furlough so that you can claim 80% of pay through the CJRS and avoid a situation where employees all want to take holiday at the same time upon return to work; or
  • immediately after the CJRS ends if you anticipate a temporary reduced need for a full workforce as things start to return to ‘normal’.

You may have a contractual right to require employees to take holiday at particular times. If you don’t, there is a general right under the Working Time Regulations 1998 to require employees to take statutory holiday, but you must give at least twice as much notice as the period of holiday (e.g. you would need to give two weeks’ notice to require an employee to take a week’s holiday). So you need to start thinking about giving notice sooner rather than later.

 

Check employment contracts

There may be scope within the existing terms of a contract of employment to reduce pay or hours of work. If this is the case, it is advisable to inform employees of this in good time before they return to work.

The contract may also allow you to lay off employees. This means that the employer provides employees with no work (and no pay) for a period while retaining them as employees. Unlike dismissal, it is a temporary solution to the problem of no or less work. An employee who is laid off and who has been employed continuously for at least 1 month is entitled to statutory guarantee pay of up to £29 per day for a maximum of 5 days in any three-month period. As an alternative to laying an employee off, an employer may put employees on short-time working (i.e. reduced hours). As with laying employees off, there needs to be a specific clause in the employment contract allowing an employer to put employees on short-time working.

It is important to note that an employee who has at least two years continuous service and has been laid-off or who receives less than half a normal week’s pay due to being put on short-time working for more than 4 weeks in a row or 6 weeks in a 13-week period can resign and claim a statutory redundancy payment.

 

Agreeing reduced hours or pay

Employees may be prepared to agree to work reduced hours or to receive reduced pay, particularly where redundancy would be the alternative. If employees are asked to agree to this, it can be helpful to give an assurance that hours (and pay) will be restored as soon as circumstances permit. You should start any such discussions with your employees in good time before the end of the CJRS to ensure that you have sufficient time to seek agreement from each employee individually.

 

Unpaid leave

Asking employees to take a period of unpaid leave can be another option. Whilst normally an unattractive option for employees, it may be more attractive at the moment given the decision to close schools and as some may be fearful of coming to work due to their own age / health or because they live with elderly or vulnerable people. This option does have the advantage for employees that they remain employees and so are likely to be restored to their previous terms when circumstances permit.

 

Dismissal

This is, of course, a last resort for employers who need to permanently reduce staffing levels or where other options set out above cannot be put in place.

For those employees with under two years’ service, an employer may be able to dismiss the employee by simply giving contractual or statutory minimum notice (whichever is longer). Such employees are not entitled to a redundancy payment and cannot usually make a claim for unfair dismissal. However, an employer will need to consider other individual factors such as whether there may be a risk of a claim for unlawful discrimination. This option is not without its risks and we strongly suggest that employers obtain legal advice from us before simply dismissing staff.

A safer option (and one which should always be followed for staff with or close to two years’ service) would to be to follow a redundancy procedure. Employees with two or more years’ continuous service are entitled to a statutory redundancy payment. You must follow a fair process and, depending on the number of proposed redundancies, you may be required to comply with the statutory rules on collective consultation (which in some cases will require a minimum consultation period of 45 days). If you need to make redundancies before the end of the CJRS, you should start planning your redundancy process now. This can be a minefield and again, we strongly suggest that employers obtain legal advice from us.

For further guidance about how we can help you and your business during the Coronoavirus pandemic visit our support hub, or contact a member of our Employment Law team.

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