The end of furlough: implications for businesses

The end of furlough: implications for businesses

Furlough came to an end on 30 September, and we’re starting to see the financial impact on many companies. 

We’ve explored what this change means for employers and employees.

Officially known as the Coronavirus Job Retention Scheme, the government’s furlough scheme safeguarded millions of people’s livelihoods during the pandemic. While employers were still responsible for national insurance and pensions, the scheme initially provided 80% of a person’s salary – later reducing the government’s contribution and requiring employers to top up the shortfall – capped at £2,500 per month.

As of 14 August 2021, approximately 11.6 million jobs across 1.3 million firms had been furloughed in the UK. However, the scheme came to an end on 30 September – throwing many companies into disarray at what is still a tumultuous time in many industries.


What was the process for ending furlough?

There is no agreed formal process for ending furlough, unless one has explicitly been set out in a contract with employees. However, there are ultimately two options for bringing staff back on board.

In the first scenario, if there hasn’t been a downturn in work or any changes that are going to impact the employment contract, employees can return to work on their pre-furlough terms and conditions. However, employers will still need to think about health and safety considerations, updating risk assessments, and communicating any changes to workplace procedures.

The second scenario involves employees returning to the workplace on changed terms and conditions, for instance if there’s been a downturn in work and the employer is looking to reduce their hours or pay. This can be done on either a temporary or permanent basis, both of which would have to be consulted with employees.


What happens in a redundancy scenario?

In some instances, employers will need to make staff members redundant – which should be done compassionately and following due process. Proceeding with redundancies following furlough is no different to any other time, apart from potentially communicating via channels such as Zoom, Teams or WebEx.

Employers need to ensure a redundancy process is set out, involving an assessment of how many jobs are at risk and whether any can be saved; a consultation with staff in order to avoid unfair dismissal claims; proper statutory notice; and a calculation of any redundancy pay. As we’re at the end of furlough scheme, where companies have not already completed the redundancy consultation process for furloughed staff, companies may be looking to bring their employees back into the workplace and then begin the consultation process, or undertake this remotely via video conferencing or telephone.


Can employees refuse to return to the workplace?

The starting point for deciding this is the employment contract, which should specify the employees’ usual place of work. If it does state where the workplace is, then, as a matter of contract, the employer can ask and expect employees to return to the workplace on reasonable notice. However, there could be issues around health and safety considerations, especially considering a piece of legislation that has come to the fore during the pandemic – under sections 44 and 100 of the Employment Rights Act 1996, employees are protected from repercussions, including dismissal, if they refuse to attend their workplace resulting from a reasonable belief of serious and imminent danger. In most cases, though, as long as the measures set out in government guidance have been adopted and appropriate risk assessments updated, employers will have a good defence against such claims.


What other health and safety implications are there?

If an employee makes a complaint via the Health and Safety Executive (HSE) – an independent regulator responsible for protecting workers from dangerous working environments – then it could trigger an inspection. In most cases, they would probably give some advice around what companies should be doing and point them to the guidance. However, in cases of blatant and serious breaches of health and safety legislation, fines or even criminal offences could follow.

Employees could raise their concerns informally with their employer or trigger a formal grievance process. While this could be time-consuming for the employer to deal with, it could ultimately make employees feel safer and prevent such concerns from reaching the HSE or avert potential tribunal claims.


What are the other main implications for businesses?

One of the main impacts to businesses will be financial. Employers will have to pay the full cost of wages going forward without the option of flexible furlough. The potential negative repercussions resulting from this, particularly where employees have cash-flow issues or are experiencing a downturn in work and just getting back on their feet following the end of coronavirus restrictions, are compounded by national insurance increasing from April 2022, Brexit, immigration issues, international supply-chain constraints and recruiting difficulties. These, among other external factors, will create a complicated background for employers to navigate. Some staff may also decide not to return, leading to additional costs incurred through recruiting new staff or finding themselves with a staffing shortage.