The end of furlough: is redundancy the only option?

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Pre-2020, ‘furlough’ was a vague, unrecognisable term that languished somewhere towards the end of a standard contract of employment. 

Only those with a razor-sharp eye for detail would have been able to explain what it meant: if a company is temporarily unable to operate, their employees can be suspended from work.   However, furloughed employees would remain employed and on the company’s payroll, with the expectation that their work will resume at a later date.

Now, with the whole world deep into the Covid-19 pandemic, few would have predicted the crucial role that furlough would come to play in the UK government’s economic rescue plan.

The Coronavirus Job Retention Scheme (CJRS) was announced on 20th March 2020, with the aim of supporting employers in paying their employees throughout the pandemic and its associated lockdowns, when many businesses were forced to close for extended periods.

Originally scheduled to end in June 2020, the CJRS has since been extended five times, in line with the uncertainty surrounding the re-opening of the country. 

The current extension of the scheme is due to finish in September this year, with the introduction of greater flexibility (employers can bring furloughed employees back on part-time hours from August) and the gradual phasing out of government financial support. 

According to government statistics, around 11.6 million jobs “have been supported by the CJRS at various times” during these unprecedented events.  Yet there is growing concern that the removal of financial support will lead to mass redundancies, as companies realise that they cannot retain their full pre-pandemic workforce.

However, for those organisations looking to make some of their employees redundant, there are a number of considerations to take into account.

The first involves calculating the cost of potential redundancies.  The financial advisory firm Kreston Reeves recommends modelling the long-term financial effects before starting the process, commenting that although “many businesses enjoy a long relationship with their employees… the cost of redundancies can be high if long-serving employees have to be made redundant.”

Can employees be made redundant while on furlough?

While employees can be made redundant during furlough, care must be taken to ensure that no part of the furlough grant goes towards redundancy pay.  Employers are also prevented from claiming the grant for furloughed employees who are serving statutory or contractual notice.

The legal requirements of a large-scale redundancy scheme remain, with collective consultations and alternatives to redundancy considered where required and appropriate. 

Additional care must be taken with furloughed employees, however.  As part of its furlough guidance, the CIPD points out that the redundancy process could be seen as automatically unfair if employers do not “at least consider re-furloughing employees or using any alternative government scheme as potential alternatives at the planning stage.” 

When planning the consultation period, organisations should also be mindful that furloughed employees may feel more vulnerable to potential redundancy, particularly in companies where other employees continued working throughout the pandemic.  It is therefore particularly important to avoid pre-judging the consultation outcome.

What are the possible alternatives to post-furlough redundancy?

Post-furlough options do not have to consist of a stark, simple choice between a full return or redundancy.

Alternative strategies could include agreeing reduced working hours with some or all staff, introducing temporary freezes on pay or recruitment, or offering early retirement to volunteers (subject to age discrimination law.) 

Communication is vital

Above all else, organisations must ensure they communicate frequently and openly with their employees at every stage of the return-to-work process, even if redundancy isn’t being considered as an option.  Any changes being considered in the workplace must be fair, equal, and take account of everybody’s individual circumstances.

Bear in mind that the pandemic has impacted everybody in different and unequal ways.  As people return to their desks, there may be an initial need for managers to pre-empt any potential conflict between employees who have been furloughed, and those who continued working throughout lockdown. 

We all need to consider that there are ongoing risks to mental health and wellbeing that will not end with lockdown and our gradual return to pre-pandemic life.  If your organisation offers access to an Employee Assistance Programme, ensure your staff know how they can access it, or consider sharing resources from mental health charities such as Mind.

To discuss end-of-furlough strategies and advice for your organisation in greater depth, please contact a member of our expert team at Viridian HR.

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