On 29 May, the chancellor revealed the government’s plans for winding down the coronavirus job retention scheme, which include flexible furloughing, as well as a gradual tapering of the grant employers can claim. However, while the plans for phasing out the scheme are more gradual than anticipated, the reality is that it still might not be enough to save jobs.
From 1 July, employers will be able to furlough employees on a flexible basis, with employees being able to work part time while furloughed. However, this early cut-off date presents an issue, as workers who have not been furloughed before 10 June cannot be furloughed after that date.
Tapering the grant
In July, employers will still be able to claim up to 80 per cent of furloughed employees’ wages up to a maximum of £2,500 per month, plus national insurance contributions (NICs) and pension contributions. The job retention scheme grant will stay the same from 1 August, but employers will have to pay NICs and pension contributions. From 1 September, the government will reimburse 70 per cent of wages (up to a maximum of £2,190), which will then drop to 60 per cent (up to a maximum of £1,875) from 1 October. This means that employers will have to pay 10 per cent of wages in September and 20 per cent of wages in October, plus NICs and pension contributions, with the scheme due to close on 31 October.
However, employers will only be able to claim the grant for hours that furloughed employees do not work. Businesses will have to pay furloughed employees their normal pay for the hours they do work.
Also, if employers have previously ‘topped up’ the grant, they will have to continue these arrangements, unless agreed otherwise with each employee.
The job retention scheme has been a lifeline for businesses but, crucially, it was always a short-term measure. Unfortunately, many companies will not bounce back from the pandemic and will continue to be affected long after the closure of the scheme.
Importantly, across a multitude of sectors, the scheme may be supporting many jobs that simply no longer exist. Redundancies are therefore inevitable, and many employers will need to make those tough decisions before the scheme ends on 31 October.
So how can businesses mitigate the risk of claims when making redundancies? A key risk when making staff redundant is unfair dismissal claims. If successful, claimants can be entitled to compensation of up to 52 weeks’ gross pay (subject to a statutory cap). Additionally, the risk of costly discrimination claims is also high given the disproportionate impact Covid-19 is having on employees with protected characteristics. A higher proportion of these workers tend to be on furlough leave, either as a result of being in one of the vulnerable groups or because of childcare responsibilities.
A thorough and fair redundancy process is vital, and consultation is key. Employers will need to engage in individual consultation with employees before making redundancies and, if the business is proposing to make 20 or more redundancies in a 90-day period, it will also need to collectively consult with employee representatives for at least 30 days before the first of the dismissals take effect (or 45 days if 100 or more redundancies are proposed).
Particular care will also need to be taken when selecting employees for redundancy. While an employee being on furlough leave may indicate that their role is no longer required, making redundancies purely on that basis presents a higher risk of unfair dismissal and discrimination claims. A considered redundancy process is therefore key to reducing risk, especially at a time when many businesses can ill afford the cost and management time of employee litigation.
Michelle Hobbs is senior associate at Stevens & Bolton