Are you flexi furlough ready? 10 issues for employers to consider
It is estimated that the furlough scheme is currently subsidising the wages of approximately 9 million employees.
From 1 July 2020, employers can have furloughed employees work part time and still claim under the furlough scheme for the hours not worked. We set out below some of the key issues for employers to consider as the furlough scheme changes.
1. Employers will need to decide whether or not they will continue to furlough employees after July. If so, will they continue to “fully” furlough or “flexi” furlough employees? It would be advisable to start preparing cost forecasts now, particularly for August, September and October when employers will be required to pay under the furlough scheme.
2. Employers should calculate how many employees they need furloughed and check the maximum number of employees that they can claim for after 1 July 2020. This is important because from 1 July 2020 the maximum number of employees an employer can claim for in any claim period cannot be more than the maximum number of employees claimed for in any claim period prior to 30 June 2020. So, for example, if an employer claimed for 15 employees in April, 40 employees in May and 25 employees in June, it cannot claim for more than 40 employees after 1 July 2020.
3. If the employer is operating a practice of rotating furlough and a previously furloughed employee started a new period of furlough before 30 June 2020, the employee will need to be furloughed for three consecutive weeks before they can start flexible furlough. Therefore, for example, if a rotation started on 22 June 2020, the employee must remain on furlough until 12 July 2020 and, therefore, 13 July 2020 is the first day that the employee can be placed on flexible furlough.
4. If employers intend to use flexible furlough from 1 July 2020, they will need to discuss and agree a working pattern with employees and confirm the arrangement in writing. It is safer to do this by way of issuing employees with a new flexible furlough agreement (as opposed to a side letter amending an existing furlough agreement) although our view is that the agreed working arrangements can be set out in writing separately with employees. No minimum furlough period is required from 1 July 2020, and in our experience a number of employers are currently adopting a one week on, one week off arrangement.
Employers should remember that an employee cannot do any work for them when they are on furlough.
5. Employers should consider whether redundancies will be necessary and, if so, when they are likely to be made. Employers will need to consider whether they can wait until the furlough scheme ends on 31 October 2020 to make redundancies or whether they need to act sooner. If employers are making mass redundancies, they should remember that collective redundancy consultation rules apply and so they will need to undertake a mandatory period of consultation (30 days where 20 to 99 redundancies are proposed and 45 days where 100 or more redundancies are proposed) before they can make redundancies. Such time periods will need to be factored into redundancy planning.
6. For employers keeping employees on full furlough, it is advisable to check existing furlough agreements to see whether any further employee consent is required to extend the period of furlough.
7. For employers planning to use flexible furlough, employee consent will need to be obtained and a new flexible furlough agreement will need to be entered into with the employee.
8. For employers using a furlough rotation system, the employer will need to enter into new agreements with employees if new furlough rotation arrangements will operate from July 2020.
9. For employers currently topping-up the 80% subsidy, it is advisable to undertake a cost planning exercise and consider whether or not it is affordable to continue to do so, particularly as employers will be required to contribute under the furlough scheme from 1 August 2020.
10. The furlough scheme will end on 31 October 2020 (and the Government has repeatedly insisted that it will not be extended) so it is advisable for employers to start planning for November and beyond. In the summer statement on 8 July 2020, the Chancellor announced a one-off Job Retention Bonus under which employers can receive a payment of £1,000 for each furloughed employee who is brought back from furlough and who remains continuously employed until 31 January 2021 provided the employee has earned in excess of £520 per month on average. Whilst further details will be announced by the end of July, it is anticipated that payments will be made to employers from February 2021.
The crucial question is whether employers will consider it is enough of an incentive to reconsider redundancies, or whether it will benefit only those employers who were planning to bring back furloughed employees anyway. It may have greater benefit in certain sectors such as retail, leisure and hospitality although instinctively we doubt it will be enough to make employers who have already concluded that redundancies cannot be avoided to reconsider.
The Job Retention bonus is paid to employers, not employees, and there appears to be no obligation on employers to pass it on to employees or use it to pay staff costs. However, if the bonus is not enough by itself to avoid redundancies, employers might consider using it in combination with a temporary reduction in pay or hours. What’s not clear is whether the Job Retention bonus will be payable to employers who have already brought furloughed employees back to work, or who furloughed employees for only a short period of time, or whether it is payable if a business is forced to close before 31 January 2021 because of a local lockdown.