The evolution of the furlough scheme: employers’ next steps

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Although guidance on the next phases of the Coronavirus Job Retention Scheme is not expected until later this month, employers need to start planning what their workforces will look like now, writes Mark Kaye.

Earlier this month, chancellor Rishi Sunak made yet another groundbreaking statement in the House of Commons, in which he set out his plan for re-shaping the Coronavirus Job Retention Scheme (CJRS). It has been extended for a further four months, up to 31 October 2020, and that no changes will be made to the CJRS until the end of July so that, for example, the existing government grant of 80% of wages (capped at £2,500 per month) will continue to remain in place,

However, from 1 August, the CJRS will become more flexible and part-time furloughing (which is currently prohibited) will be permitted. More significantly, employers will be required to share the cost.

While the extension of the CJRS was universally welcomed, the uncertainty around the employer contribution has caused widespread concern for employers – and this uncertainty will remain until further government guidance is provided at the end of May.

What seems clear is that the government wants employers to take a more proactive approach about whether they should be retaining their workforce or whether they should be taking steps to make redundancies. The key driver is to avoid a so-called “zombie economy” in which the government is propping up large numbers of employees under the CJRS when, in reality, there is no prospect that their employer will be able to bring them back once the scheme comes to an end. This means employers will need to carry out a difficult analysis about future projections when they will often be entirely unclear about how and when their business will be reopening.

What will the CJRS look like after 1 August 2020?

We will not have an answer until the government guidance is published, but the best guess is that the CJRS will be altered so that the government’s 80% contributions drops, perhaps to 60%, and the employer has to make up that 20% differential. There may also be a gradual tapering off of the government contribution up to the end of October when the scheme is intended to be wound up. This would probably mean an increase in employer contributions.

What do employers need to address now?

There are a number of issues that employers will need to consider now. In particular:

  • Are they are in position to make a contribution, once the government subsidy is reduced? If so, will they be topping up to 100% of salary or will they only be topping up to 80% of salary? Depending on the circumstances, this is likely to need further employee engagement and may mean that express employee consent is required if there is going to be a change to what employees are currently receiving.
  • Although the new concept of part-time furloughing is undoubtedly sensible and practicable – and indeed there are calls for it to be introduced earlier than 1 August – it is likely to bring with it a number of issues that employers will need to be mindful of. For example, there may be issues in relation to whether there is a contractual right to change an employee’s working hours, which is likely to be more problematic if the employee is not being paid 100% of salary.
  • There may also be place of work issues to consider if, for example, an employer is using new or alternative “Covid Secure” premises as a result of the need to implement social distancing. In this case, employers will need to assess their contractual mobility clauses, consult with their people and give them reasonable notice prior to relocating them to new premises.
  • There are likely to be two “cliff-edges” when employers would have had to commence a 45-day collective consultation process. The first is likely to be on 16 June 2020, which is 45 days prior to 1 August 2020, when the CJRS will change and some employers will have to contribute towards payments to furloughed employees.  The second “cliff-edge” will be 15 September2020, which is 45 days prior to the end of the CJRS on 31 October 2020.  Indeed, these dates may be earlier if an employer has a proposal at an earlier date.

While there is much employers will not know until further details are published at the end of May, there are some issues that they can start considering now. Unfortunately, one of the most significant points for consideration will be assessing how many employees can be retained.

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Mark Kaye

About Mark Kaye

Mark Kaye is senior associate, employment and labour at BCLP.

2 Responses to The evolution of the furlough scheme: employers’ next steps

  1. Avatar
    Martin 27 May 2020 at 10:01 am #

    I’d be interested to know where information on a possible tapering off is coming from. Rishi Sunak’s statement on 12th May was pretty clear – extension to 31st October, with 80% support from Government still in place for those who remain furloughed. The flexibility of bringing staff back part time from 1st August (with the employer covering that cost) seemed the only cost sharing/ reduction in Government contribution. It wasn’t said to relate to the avaialbility of 80% support to those who remain furloughed. And this remains the line on the Gov website. https://www.gov.uk/government/news/chancellor-extends-furlough-scheme-until-october

    • Rob Moss
      Rob Moss 27 May 2020 at 11:56 am #

      You’re right Martin, it is the line on the government website but announcements in Parliament give a strong indication of what’s coming down the line. The repeated line by Sunak and others of “no cliff edge” suggests a tapering off.

      But Sunak’s statement on 12 May appears to confirm it: “Until the end of July, there will be no changes whatsoever. Then from August to October the scheme will continue, for all sectors and regions of the UK, but with greater flexibility to support the transition back to work. Employers currently using the scheme will be able to bring furloughed employees back part time. And to change their incentives, we will ask employers to start sharing, with government, the costs of paying people’s salaries.

      “Full details will follow by the end of May, but I want to assure people today of one thing that won’t change: Workers will, through the combined efforts of government and employers, continue to receive the same overall level of support as they do now, at 80% of their current salary, up to £2,500. I’m extending this scheme because I won’t give up on the people who rely on it.”

      Personnel today will bring news of the detail once it is published later this week.

      Source: House of Commons Written Statement.

      Rob Moss, Editor

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