25 August 2021
Danny Done, managing director at Portfolio Payroll, outlines key considerations for employers
The coronavirus job retention scheme (CJRS) was implemented to support employers who were not able to operate as normal due to the pandemic. Initially, by designating employees as ‘furloughed’, employers could recover a portion of employee wage costs up to a £2,500 cap. As confirmed by the Budget, delivered on 3 March 2021, the scheme will continue to operate until the end of September 2021 with adjustments to the funding level initially in place.
From November 2020, until the end of June 2021, employers were able to claim 80% of staff wages to a maximum of £2,500 per employee per month for any hours unworked. Employees on full furlough (not working any hours at all), were able to get 80% of their wages per month, unless their employer decided to top it up to 100%. Where an employee was on flexible furlough (working only some hours), they were paid in full by their employer for the hours worked and the grant covered 80% of pay for their unworked hours only, subject to a cap which was less than £2,500.
From 1 July 2021, the government’s grant reduced to 70% of furloughed employees’ wage costs for their unworked hours at a cap of £2,187.50. It was necessary, and will be until the scheme finally comes to an end, that the pay furloughed employees received remained the same, at a minimum of 80%, with the £2,500 cap. This meant that, in July, employers contributed 10% up to £312.50 from their own pockets.
From 1 August 2021 until the scheme ends, the government’s grant reduced a final time to 60% of furloughed employees’ wages for their unworked hours at a cap of £1,875. Employers have needed to contribute 20% to staff wages up to £625.
As the scheme is ending shortly, what do employers need to consider?
Not every employer would have been able to afford to contribute towards furloughed staff wages and would have likely brought most people back to work already, even if on a part-time basis. Employers who have not been able to take staff off furlough because they are still experiencing a downturn in demand will need to consider how they can support employees as the scheme ends.
It may be that employees are brought back to work on a part-time basis, outside of flexible furlough rules, to avoid making redundancies. However, this will depend on how much work is available and if staff agree to the variation to their contract terms.
It is important to note, as mental health awareness carries on making headlines, that employees may be struggling during this period.
It is advisable to offer them support in the form of an employee assistance programme or equivalent where possible.
Protecting business interests
Employers will need to consider how they can protect their business interests, too. This could, again, take the form of bringing staff back into work or allow them to work from home if possible.
However, employers may also need to consider the following.
Reducing staff hours – employers may want to make structural changes to their workforce if possible, such as reducing the number of hours their employees work, bringing them back on a part-time basis. This will not only help to support employees who may have otherwise been made redundant, it will allow employers to retain their existing talent. Again, employees need to agree to this change as it will impact on the terms and conditions of their current contracts. Most importantly, employees cannot be forced to reduce their hours.
Lay-offs and short-time work – otherwise known as ‘LOST’, these are usually considered as an alternative to compulsory redundancies, especially when there is a downturn in workload or the finance necessary to fund full-time employment. Employees may be placed on unpaid LOST where there is a contractual term entitling employers to do so. In the absence of such a contractual clause, employers will need to agree this with staff, otherwise it will breach contracts of employment.
Redeployment – if one area of a business no longer requires either all, some, or most staff, then employers can redeploy them elsewhere, either temporarily or permanently.
Redundancy – employers should only consider redundancies as a last resort.
The furlough scheme has been a saving grace for many employers whilst coronavirus lockdown restrictions have been in place. As the scheme ends, employers will need to find a fine balance between supporting employees and doing what is best for their business. Whatever direction employers take, it will be important that they follow the correct procedures to avoid costly tribunal claims, e.g. for unfair dismissal.
Featured in the September 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.