Post-Furlough, Do You Have An Exit Plan?

posted by KeithDaniel

HM Treasury has announced that the Coronavirus Job Retention Scheme (the “Scheme”) has been extended to the end of June 2020. There is no doubt that the Scheme has been a life line for many employers. However, organisations will need to start planning for their post-furlough future and will need to establish whether their pre-crisis structure and employment costs will be sustainable when government subsidies come to an end or are reduced.

If there is a need to reduce staffing costs, a range of responses will need to be considered over the coming weeks to ensure there is a strategy in place, ahead of 30 June.

We have considered some frequently asked questions below regarding possible furlough exit strategies in an attempt to avoid redundancies. If redundancies cannot be avoided, it is important that employers obtain good advice as soon as possible as, depending on the reduction in headcount, collective consultation may be triggered and getting the collective consultation requirements wrong can expose the employer to significant financial liabilities, including a protective award of up to 90 days per affected employee.

Can employers extend furlough leave despite the Scheme ending?

Yes, there is nothing stopping employers from extending furlough leave when the Scheme finishes, provided that each employees’ express written consent is obtained first.

An employee’s furlough leave could be extended on its current terms, or the terms of the leave could be revised. For example, some employers will find it difficult to continue paying employees 80% of their normal pay without the assistance of the Scheme. So, as an alternative to making redundancies, employers may find that some employees consent to reducing their wage further whilst they are furloughed. This may be the case where, for example, employees are unable to work due to child care issues as a result of school closures or where an employee has caring responsibilities.

Employers could also rotate employees on extended furlough leave to make sure that they do not become isolated from the workplace.

We would advise that employers put in place a new furlough agreement in writing, evidencing each employees’ consent to the temporary furlough leave extension and its terms.

In reality, this is likely to be a welcome option for employers who simply do not have the work available for all of their workforce but wish to avoid costly redundancy costs and retain valued employees for when business returns to normal.

Can an employer implement short-time working and lay-offs?

Employees can only be laid off, or placed on short-time working, where the employer has the contractual right to do so (i.e. there is a specific lay-off or short-time working provision contained within an employee’s contract of employment) or where an employee provides consent.

Laying off employees or implementing short-time working (where there is the contractual right to do so) may not be the best solution - after a certain period of time employees have the right to claim statutory redundancy payments. Therefore, implementing these provisions may only provide a short-term fix.

Are there any other cost-effective options for employers to consider?

In an attempt to avoid mass job losses as a result of the company being unable to continue paying its staff their full contractual pay, an employer may wish to consider the following options once the Scheme has ended:

        1 - Bring employees back to work on reduced hours, with their pay adjusted accordingly;

        2 - Bring employees back to work on the same hours, but with reduced pay;

        3 - Offer unpaid or part-paid leave.

The first option may be preferable where there is not enough work available for all members of staff but the employer anticipates that business will pick up again soon.

The second option may be relevant where business is expected to return to normal quite quickly but where an employer will experience cash-flow issues if employees received their normal pay.

The third option is likely to be preferable to those employees who cannot attend work currently for various reasons, which could include child-care issues as a result of school closures, or for those employees that have current caring responsibilities.

In order to implement any one of these three options, an employer would need to seek the consent of the relevant employee first and obtain their express written consent to the temporary change. In addition, in an attempt to prevent any potential discrimination claims, we would advise that if options 1 and 2 are implemented, they should be applied to all members of staff or, at the very least, apply objective criteria for selecting such employees.

How can Berry Smith help you?

We are currently offering a retainer service for employers with regards to the Coronavirus pandemic. Through this retainer we are offering employment related guidance and template documentation for a fixed monthly fee. If you would like to learn more about this service please contact our employment department at employment@berrysmith.com