Winding Down: Changes to the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme has been extended until 30 September 2021 while simultaneously being wound down.  The level of grant available to employers under the scheme stayed the same until 30 June 2021 but has now started to reduce.

Furlough

The Job Retention Scheme, known as furlough, has been a vital safety net for millions of UK households. However, it will not be extended further, despite the delay to the lifting of lockdown measures until July.  At the height of the initial coronavirus wave, nearly 9 million people were reliant on furlough, with the government covering 80% of their wages for hours not worked.  By May 2021, 2.4 million people’s wages were still being paid by the government.

However, as the economy opens up, the responsibility for paying staff is now shifting back towards employers.  During July, employers were required to contribute 10% towards the wages of furloughed workers. This rose to 20% in August and will remain the same in September.

Winding Down

The winding down of government grants towards wages is a precursor to the end of the Coronavirus Job Retention Scheme at the end of September, forcing employers to consider their options regarding their workforce.

There are two obvious options.  Companies may either bring the employees back into work or make them redundant.    However, employers do have some room to manoeuvre between the two.  If there is no longer sufficient work, or new health and safety measures have altered the nature of work, then employees could return on different terms.

Whilst flexible furlough and rotating staff between furlough and work are currently viable options (Job Retention Schemes), more permanent arrangements will need to be in place when it concludes.  If trading conditions have not improved sufficiently, the loss of jobs may be inevitable.  However, there are alternative options available, such as redeployment.

Minimising Loss

For businesses unable to bring all their furloughed staff back into work, restructuring may help minimise redundancies.  Employees could be redeployed into new roles; roles that may differ from their previous terms of employment with regard to duties, location, or seniority.  However, in order to minimise the legal risks, agreements will likely need to be reached with each affected individual.

Through agreement, employers can also implement a variety of new working arrangements.  These could include working reduced hours for the same pay or the same hours with reduced pay.  The general contractual principle is that change can only be effective where:

  • There is provision within an employee’s contract that permits a change to be made
  • The employee agrees to the proposed change
  • The employee’s representatives (e.g. Trade Union) agree to the proposed change

Flexibility

Flexibility clauses within contracts make implementing changes like this more straightforward, as they will dictate the extent of possible changes and outline the procedure that needs to be followed. It is important to remember that appropriate periods of notice still need to be given.

Although the employer and employee, or employee representatives, would usually need to reach agreement before it can go ahead, changes may still be made without a flexibility clause. If changes cannot be agreed, they could be forced by dismissing and rehiring staff.  This should only be used as a last resort.  The changes must be absolutely necessary, and only made after consultation with the employee and following a fair dismissal procedure.

Compliance

Any changes will need to be carried out appropriately.  Employers must ensure the correct amount of notice is given to returning employees.  There is no set format for notifying employees about the end of furlough, but any relevant letter should contain a clear statement that the furlough agreement is being brought to an end and should detail the impact of this on the employee.

If any changes are being sought to the employment terms, they will need to be managed and implemented correctly within the employment documentation. If redundancy is the only option, a fair dismissal process must be followed.  The employer risks tribunal claims if they mismanage any aspect of these changes.

If you would like any advice or assistance in implementing the best course of action for your business and your employees as the furlough deadline approaches, please feel free to talk to Briars.