End of the furlough scheme: what next?

After 18 months, the Coronavirus Job Retention Scheme is closing on 30 September 2021. Originally set to run for three months, the latest statistics show that 11.6 million jobs have been supported by the scheme at various times. As at 31 July 2021, 25% of employers still had staff on furlough.

So, what options are there for employers now?

Employees work on their pre-furlough terms and conditions

If the business is in a position to do so, notify employees in writing of their return to work date and clarify that their pre-furlough terms and conditions will apply. If they are returning to the workplace, highlight the working arrangements and other protective measures in place to comply with the relevant COVID-19 guidance.

Employees work on new terms and conditions

Not all businesses with furloughed employees will be able to bring them back to work on their pre-furlough terms and conditions. Potential options include, for example, reducing hours and/or pay; introducing a new shift pattern; adjusting start and finish times; varying commission, bonus, pension or insurance entitlement; or implementing an overtime ban.

There could be a contractual right to make the change in the employment contract. For example, some employees' contracts include a right to impose short-time working (reducing hours so that remuneration for the week is less than half a week’s pay),

Otherwise, if you are changing terms and conditions, you will need employee consent (or consent via an agreed collective bargaining process). If you can’t get consent, you could impose the change unilaterally or dismiss and offer re-engagement on the new terms. Both options carry risks.

Collective redundancy consultation obligations could apply if you plan to force through changes via dismissal and re-engagement, or the offer is an alternative to making redundancies, and if 20 or more dismissals are proposed at one establishment within 90 days.

Extending furlough without the HMRC grant

Continuing furlough without the HMRC grant might be an attractive option if there isn't enough work for everyone, but you anticipate this as being very short-term. You would need a new written agreement with employees and, depending on your approach, the collective redundancy consultation obligations could apply.

Lay-off

Lay-off occurs when an employee is not provided with any work and so receives no pay for a week. There has to be an express or implied contractual right to impose compulsory lay-off. If there isn't, you could seek agreement from employees to a period of no work and no pay – voluntary lay-off.

Employees who are laid off (or put on short-time working) are entitled to a statutory guarantee payment; and those with two years' service can resign and claim statutory redundancy pay after being on lay-off (or short-time working) for four consecutive weeks, or six weeks in a rolling period of 13 weeks.

Making redundancies

There may be no option but to make redundancies, despite the cost implications of doing so (notice pay; redundancy pay for those with at least two years' service). There is a need to follow a fair process, while the collective consultation obligations will be triggered if there is a proposal to make at least 20 employees redundant at one establishment within 90 days.

Other options

Other potential cost cutting strategies include:

Recruitment freeze;
Withdrawing or delaying job offers;
Reducing the number of temporary staff;
Terminating fixed-term contracts early;
Asking for volunteers for early retirement under the pension scheme;
Outsourcing work to a service provider;
Secondments;
Requiring employees to take annual leave;
Asking for volunteers for unpaid leave; and
Offering career breaks / sabbaticals.

More information

For information on the pros and cons of these options, and the process for implementing them, contact a member of our Employment and Immigration team.

Workbox by Brodies, our HR and employment law site also has detailed guidance on: