Furlough Redefined: Employers may have to return cash to the taxpayer!

The job retention scheme has seen the government pay up to 80 per cent of furloughed workers’ salaries. This is due to come to an end in October.

The concern is that the £27.4 billion spent to support 9.4 million jobs may have just served to merely postpone inevitable unemployment.

The government have announced that employers who lay off vast numbers of their workforce, after claiming furlough, may have to reimburse the taxpayers’ money.

Read on for the latest on the redefining of the furlough scheme and what to do if you are facing redundancy.

The Coronavirus Job Retention Scheme

The Treasury has reworded the purpose of its job retention funding scheme. They are reinforcing that employers must use the money to continue the employment of their staff.

The government unveiled the redrafting of the scheme last week. The aim is that employers will think twice about laying off scores of Britain’s furloughed workforce.  

The current system involves the government reimbursing employers up to 80% of furloughed employees’ salaries. Amounts are capped at £2,500 per month, plus national insurance, and pensions contributions. This will change on 1st August 2020, when employers will need to cover National Insurance and pension contributions.

From the 1st July 2020, employers could furlough employees on a part-time or full-time basis. The last date on which employees could be placed on furlough for the first time was 10th June 2020.

From the 1st September 2020, the government’s subsidy will reduce to 70% and then to a further 60% from 1st October 2020.

The scheme will close on 31st October.

Pending furlough redundancies

Despite the UK edging out of lockdown, we are still facing a grave economic downturn. Therefore, mass redundancies should still be expected this summer.

Some industries are yet to reopen, while others are taking longer to recover. So it begs the question, how can employers continue covering the cost of salaries? 

Moreover, with the scheme is set to end in October, significant job losses should be anticipated for later in the year too.

UK industry giants British Airways and Rolls Royce have announced pending redundancies. Rolls Royce furloughed over 4,000 staff in May but will be sacking around 9,000 employees. This equates to a fifth of their global workforce. However, the concern is that furlough funds are meant to save jobs, not pay the wages of staff put on notice of redundancy.

This announcement has coincided with the changes to the furlough scheme effective of 1st July 2020. Eligible employees can be put onto flexible furlough from the start of this month. However, the costs of furloughing staff from the start of August will gradually increase for employers.

Where do employees stand?

One view of the pending mass redundancies is that businesses are attempting to take advantage of the pandemic. They are using it to cut jobs and weaken the standing contracts of its remaining employees.

The furlough scheme has invariably made the redundancy process more difficult for employers. It has left them wide open to claims for discrimination or unfair dismissal.

Be aware that, simply because you have been furloughed, it does not indicate that your job role is not essential. Employers should not automatically place all furloughed employees into the redundancy pool for selection.

Certain groups of people are more likely to have been furloughed. These can include the medically vulnerable, or those with children due to childcare needs. Therefore automatically sacking those on furlough can result in a flood of discrimination claims.  

Ensure that your employer has been objective in their selection and that their choices were moderated.

Potentially redundant employees should be allowed to challenge their selection for redundancy and given the right to appeal against any dismissal. Where possible, employees should also be offered suitable alternative roles within the company.

If you are concerned about your selection for redundancy or you feel that you have been subject to discrimination or unfair dismissal, then seek legal advice immediately.

Where do employers stand?

The current wording of the scheme still fails to clarify employers’ rights. It implies that bosses should not pay notice periods with furlough money. Therefore they may have to pay the money back if they have already done so.

Some are interpreting the rewording as an attempt to crack down on fraud.

Whatever your view, employers still need to know the legal policies on redundancy and furlough payments. The HMRC have implied that the scheme can be used both for consultation and notice periods but not redundancy pay. However, added it was not a legally binding view.

Before starting the redundancy process, you must consider your timing. If you are looking to dismiss more than 20 employees within 90 days, you must:

• Collectively consult with the affected employees (or their representatives) for a minimum of 30 days before the dismissal takes effect.
• The timescale increases to 45 days if 100 or more dismissals are proposed.

The purpose of the consultation period is to attempt to reach an agreement with the employees and discuss ways in which:

• Dismissals can be avoided
• The number of job losses can be reduced

Suggestions often include reducing work hours or introducing pay cuts. 

However, reaching an agreement is not mandatory.

What are the current furlough redundancy pay rules?

Employees on furlough leave retain the same rights to redundancy payments.

• Redundancy Pay

Employees with two or more years service are entitled to statutory redundancy pay. Depending on the age of the employee, the amount will equate to 0.5 weeks, one week or 1.5 weeks pay for each full year the employee has worked for the employer. If you are

• • under 22, you are entitled to 0.5 weeks of pay per full year. If you are 22 or older, you are entitled to 1-week pay per full year
  • 41 or older, you are entitled to 1.5 weeks pay per full year
    

•  Redundancy Notice

Those facing redundancy are entitled to between one and 12 weeks’ statutory notice. The notice period depends on the employee’s length of service.

Employees may have to work their notice period, spend it on furlough leave, or employers can pay employees in lieu of notice (PILON).

You may be entitled to more than the statutory notice. However, it is best to check your employment contract for details on your notice period and your general redundancy rights.

• Insolvency

If your employer is insolvent and has not made the payments owed, then we recommend seeking further legal advice. Employees can apply to the Insolvency Service to claim back any outstanding payments where applicable.

What about the future?

The scheme is currently costing the taxpayer over £20 billion. With the government aiming to wind down the scheme between now and October, employers are increasingly forced to find additional funds to pay their employees.

There is hope that the economy will recover in the coming months as lockdown eases and businesses reopen. However, there is no guarantee that a return to normality will be plain sailing.

Leicester has already been plunged back into lockdown following a surge in COVID-19 cases. Several pubs that reopened in the UK on the weekend for “super Saturday” have been reclosed due to positive testing. Further afield the governments in Melbourne, Australia and Serbia have reintroduced lockdown due to a spike in the pandemic.

Key Takeaway

The government have headed their advice page with the caveat that, “we are still working through a number of complexities relating to the Coronavirus Job Retention Scheme and will keep guidance updated.” This means that their current information is continually subject to change.

The latest update was that every business gets £1000 bonus per furloughed employee returning to work. Employers can access the job retention bonus if the worker is still employed as of 31st January 2021.

These are already uncertain and unprecedented times. It is made even more complicated when the support and assistance we are given can also be liable for repeated modifications.

Are you concerned or worried about being made redundant following furlough? Are you a business owner on the brink of insolvency? Whatever your questions, we have the answers.

Contact one of our employment lawyers for legal representation and advice to discuss all the issues you’re facing.