Furlough has helped secure millions of jobs, businesses and livelihoods across the UK since its introduction at the end of March 2020 due to the coronavirus pandemic. The furlough scheme is in its final months, due to end on 30 September 2021. There are no signs of any intentions to extend it like before.

From 1 July 21, employers using the scheme will need to make contributions as follows:

1^st to 31^st July:

• Employer contribution wages for hours not worked = 10% up to £312.50
• Employer National Insurance contributions and pension contributions

1^st August to 30^th September:

• Employer contribution wages for hours not worked = 20% up to £625
• Employer National Insurance contributions and pension contributions

What do employers need to know now?

1. Furlough cannot be used to pay notice – an employer will need to pay an employee full pay for any notice period
2. Furlough cannot be used as contributions towards statutory redundancy payments
3. Employees accrue holiday while on furlough but subject to sufficient notice, they can take holiday during furlough (employer to top up holiday days to 100% of their normal wages)
4. When furlough ends, employees are still lawfully employed and entitled to their full contractual wages and benefits
5. Employees on furlough will be feeling exceptionally nervous and communication is key
6. Employees accrue service while on furlough meaning that any notice entitlement or statutory redundancy payment will be calculated based on their total length of service (and normal wages)
7. Flexible furlough continues to be in effect until 30 September (contributions for non-working hours shall apply).

Furlough scheme checklist

• Monitor the dates from/to and the written agreement
• Ensure you keep a record of all furlough related documents for 5 years (GDPR compliant)
• Keep in touch with employees – this is very important
• Keep records of the interaction you have with furloughed employees
• Ringfence redundancy cost provisions
• ‘Encourage’ or give notice to employees to take holiday during furlough leave (topping up wages for holiday days to their normal wage).

How can you prepare for the end of furlough?

We would encourage businesses to look at the roles they currently have furloughed and whether or not they are viable once furlough ends. This is because:

1. Understanding your true business model going forward allows you to strategically and financially plan better
2. There are costs associated with furloughed employees such as the accrual of holiday, length of service and employer contributions
3. Furlough cannot be used for notice periods
4. If ultimately employees will have to be made redundant, the costs will become higher as service increases as may also the risk of claims.

Gemma Murphy, Director, explains:

“We have all learned a lot through this pandemic and certainly businesses have had to change. It is important as business owners that we review what steps our businesses need to take over the coming months and the structure our businesses need to take.

If a business does need to make redundancies, it is critical that they follow a fair and reasonable redundancy consultation process. Failure to do so will in the long run result in costly claims in the employment tribunal. So many businesses try to save money and take short-cuts at the restructuring stage only to have to pay it back in compensation costs later. This can be crippling to a business.”

Start planning for the post furlough times now

Now more than ever we must use HR practices to stay connected with our people, to start the vital conversations and support our people through uncertainty and change.

We all hope that by the end of July as we take the final step in the Government roadmap and an economic revival will be underway as we all return to ‘normal’, whatever that may look like. However, all organisations will need to start planning for the future and, as part of this, whether their pre-crisis structure and employment costs will be sustainable when government subsidies come to an end.

The team at ViewHR are encouraging businesses to take proactive steps to understand their true business model going forward so that they can strategically and financially plan past furlough. If your business needs to take steps to make redundancies because furlough is ending, it’s time to start planning and budgeting for this now. Remembering that how you treat employees who exit a business resonates hugely both with those leaving and those staying.

Talk to us confidentiality at hr@viewhr.co.uk or call one of our team on 01425 205390.

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