When does furlough end and what are employees’ rights once it has ended?
The Coronavirus Job Retention Scheme was introduced by the government in April 2020 in response to the global coronavirus pandemic as a short term measure to support employers and the closure of businesses by paying a proportion of employees’ salaries. It is due to end soon, with the last day of furlough being on 30 September 2021. Many employees are still on furlough or flexible furlough though, and employers will now need to consider what options are available moving forward. We have set out what we believe to be the main options available below:
Bringing employees back on their original terms and conditions
Employees should be given reasonable notice from the employer to return them to work. Where the role is still viable within the business, employees should be informed of the date that they are required to return to the workplace, and it should be explained that they will be returning on their previous terms and conditions, and their usual hours of work and rate of pay.
Some employees may have concerns about returning to work, due to the continuing high rates of infections, and these issues should be dealt with on a case by case basis. Health and safety risk assessments can be done to assure employees that they are returning to a safe working environment and considerations should be taken of reasonable adjustments for disabled employees.
If employees have been away from the workplace for a long time, and especially if they have not been performing their role, training courses and inductions may be appropriate upon their return.
Making the employee’s role redundant
Inevitably, if employees have been on furlough since the beginning of the scheme, it may be that their role is no longer economically viable in the business once the government’s support is removed, and the only way to sufficiently reduce costs for the employer would be to reduce the headcount within the business.
Advice should always be sought when making roles redundant to ensure that a fair and full process is followed to ensure that any dismissals made are fair. The employment team at Smith Partnership have experience in managing redundancy situations and can assist companies with the process, also ensuring that a true redundancy situation exists.
It is important to note that the furlough scheme does not prevent employees on the scheme from being made redundant, so an employer would not have to wait until the end of the scheme to start any redundancy processes.
Once the process is complete, any redundancy payments which need to be made will have to be based on the employee’s contractual salary (i.e. not the reduced furlough rate).
The furlough scheme can no longer be used to pay an employee’s notice period and furloughed employees are entitled to their usual notice at full pay.
Asking employee’s to take unpaid leave
Another option to avoid redundancies, is for employers to ask employees to take unpaid leave. However, employers will need the employee’s express consent to do so, and it is recommended that the agreement to take unpaid leave is confirmed in writing. We can provide template letters as required. This is, however, a short-term measure only.
Reducing employee’s pay
For a reduction in pay to be applied to employees, it must be expressly agreed with the employees, to avoid claims for unlawful deduction from wages, and possibly constructive dismissal. Employees will understandably be reluctant to agree to such changes, but may be more amenable if a pay reduction is proposed as a necessity to avoid redundancies and safeguard jobs.
If employees do not agree to the reduction in pay, then employers do have the option of dismissing them, and seeking to re-engage them on new contracts with the lower rate of pay (often known as “fire and re-hire”). However, the employer will need to show that there is a genuine business need for the reduction in pay, and that they have carried out meaningful and genuine consultation first to seek the agreement of the employees affected. Further, the correct notice must be given to terminate the contract and the employees must be re-engaged on the new contract on expiry of that notice period. This method does have inherent risks, as employees may be able to bring claims of unfair dismissal, and where the change affects 20 or more employees, the employer must follow the statutory procedure for collective redundancies, with minimum consultation periods.
This can be a very difficult process to manage, and we strongly recommend that you seek legal advice first to avoid highly costly mistakes.
Reducing employee’s hours and pay
Employees may be more agreeable to a reduction in pay if their hours are also reduced, as this may help with “work life balance” and they are not in a position of doing the same work for less pay. The process for implementing the change with the employees is the same as discussed above for reductions in pay, and again we advise caution with this approach, and recommend that advice is sought on the particular circumstances.
Rather than having to go through any lengthy process, another option available to employers is to have a ‘protected conversation’ with the employees in question. In theory, and if done correctly, a protected conversation allows for an employer to approach an employee with an offer of money under a settlement agreement, for an employee to leave the business without any risk of them being able to bring any claims against them.
Employers need to ensure that they follow the correct procedures when conducting protected conversations to ensure that they are covered, as getting it wrong could mean costly litigation being brought against them. The ACAS code of Practice on Settlement Agreements sets out the best practice for conducting protected conversations, and can be found here, https://www.acas.org.uk/code-of-practice-settlement-agreements/html.
Lay-Off or Short-Time Working
Another option for employers is to look at Lay-Off or Short-Time Working. Laying off employees is where employees are provided with no work for a period of time, whilst still retaining their employment status. Short time working, is where employees are provided with less work and less pay than usual, again, whilst they are still employed. However, the employer must have a contractual right to impose each of these. Without the contractual right to Lay-Off or put employees on Short-Time Working, an employee will be entitled to bring a breach of contract/ unlawful deduction from wages claim against their employer.
The rights an employee has whilst they are on Lay-Off or Short-Time Working will depend upon whether there is a contractual right for an employer to lay them off or put them on short-time working. For example, an employee who is laid off or put on short-time working will be entitled to apply for a statutory redundancy payment in certain circumstances, and employees will be entitled to be paid a statutory guarantee payment by their employer for part of the period in question.
As you can see, there are lots of points to consider when bringing employees back from furlough, and it will depend upon the specific circumstances facing a business at that time. If you have any questions about the topics raised in the above, please contact our Employment experts James Johnson or Alexandra Bullmore.