Moving forwards from furlough

Now that we have all got to grips with “furlough” under the government’s Coronavirus Job Retention Scheme (CJRS), UK businesses are starting to look ahead and consider how to navigate a return to normal or “the new normal” when the government relaxes lockdown measures and/or when the furlough scheme ends.

The CJRS has preserved many jobs and provided employers with breathing space and essential financial support, but what will happen when the scheme expires? It is currently due to end on 30 June 2020, unless the government further extends the scheme to some or all organisations and/or introduces some transitional measures.

Different organisations and sectors will find themselves in very different positions along a spectrum which ranges from returning to business as usual without too much difficulty and within a reasonable time frame (in a best case scenario) to a business not surviving at all (in the worst case). As such, there will be many different ways to exit from furlough.

It is vital that businesses take time now to carefully consider their plans post-furlough, including:

• Is your pre-COVID-19 business and staffing structure still viable?
• Have any roles disappeared or are fewer needed?
• How are business and job roles impacted by new ways of working and technology?
• Where should/can costs be saved?
• What might need to change going forwards?

The answers to these questions will shape what option(s) you use to exit furlough and move forwards, some of which are summarised below:

1. Bring employees back to work on their previous terms and conditions (if you can afford to do so).

As the government guidance does not prescribe how to bring employees back to work from furlough, you should either give reasonable written notice (probably not less than 48 hours) or the period of notice specified in your furlough agreement with the employee.

However, you may well notify employees sooner, for example, if the government announces that the CJRS will not be extended beyond 30 June 2020.

2. Keep employees “laid-off”, if their employment contracts contain a lay-off clause or if you included such a clause in your furlough agreements.

Although there is no prescribed process to follow to lay-off employees, lay-off would be subject to the implied term of trust and confidence, so you would need to briefly consult with employees and give reasonable notice that you are invoking your contractual right to lay-off (referring to the relevant clause) to avoid being in breach of contract.

Once employees are laid-off, you do not need to give them any work or pay, save for statutory guarantee payments of £30 per day (or the employee’s daily pay, if lower) for a maximum of 5 days in any 3-month period.

Whilst this may be a “cheap” option initially, please note that:

• holiday will accrue as normal during lay off (and could be requested, taken and paid during that period); and
• if employees are laid off for 4 consecutive weeks or for 6 weeks over a rolling 13-week period, they can resign, treat themselves as redundant and a statutory redundancy payment will be payable unless you issue a counter notice (which essentially indicates that you believe normal work will resume within 4 weeks). The mechanism for this is complex, so please seek advice if you are considering lay off.

3. Put employees on short-time working, if their employment contracts contain a short-time working clause.

Short-time working involves giving employees less than 50% of their usual work and only paying them for hours worked and statutory guarantee payments for a maximum of 5 days in any 3-month period. (Please note they cannot receive a guarantee payment for a day they work.)

As with lay-off, this would be subject to the implied term of trust and confidence, so you would need to briefly consult with employees and give reasonable notice that you are invoking your contractual right to place them on short-time working (referring to the relevant clause) to avoid being in breach of contract.

In addition, employees on short-time working for 4 consecutive weeks or for 6 weeks over a rolling 13-week period can resign, treat themselves as redundant and a statutory redundancy payment will be payable unless you issue a counter notice.

4. Ask employees to agree a change their terms and conditions, such as:

A. agreeing to take a period of unpaid leave;
B. agreeing to reduce their working hours and receive pro rata pay; or
C. agreeing to do the same working hours but at a reduced rate of pay.

You may either be proposing a change for all employees, or you may be asking furloughed employees to agree to return to work on amended terms (to mirror amendments agreed with staff who remained at work). However, the same principles will apply to both scenarios.

As with furlough, employers cannot force employees to take unpaid leave or accept reduced hours and/or pay. However, you can request employees’ agreement, by consulting with them and then asking them to sign to confirm their agreement to the amended terms.

If employees refuse the change, you could terminate their employment and re-engage them on the new terms. However, this could give rise to unfair dismissal claims and a collective consultation risk (see below).

If you recognise a trade union for collective bargaining purposes, you may be able to agree the proposed change(s) with the union, which might facilitate employees agreeing.

Collective consultation will not be needed if you are simply seeking agreement to change terms and conditions. However, it will be needed if you are proposing to:

• dismiss and re-engage dissenting employees (who could exceed 20 in number); or
• make redundant 20+ employees,

if agreement cannot be reached and within a 90-day period.

Collective consultation obligations are summarised in 6 below.

5. Offer unpaid (or part-paid) leave or sabbaticals

This can be distinguished from 4 above, as you are offering this as an option to employees, rather than asking them to agree to it. You should also make clear that you may decline a request by an employee who is needed for business reasons, as you might in a voluntary redundancy scenario.

Whilst there may not be a huge take-up by employees, it might suit those with school-age children (whom they are having to home-school and then look after over the summer holidays) or those who are enjoying volunteering in a different capacity during the crisis.

If an employee requests a sabbatical, which you are happy to grant, you should put a simple agreement in place which confirms any agreed terms, dates, pay etc and is signed by you and the employee.

6. Restructures and redundancies

The HMRC furlough guidance for employees makes clear that “your employer can still make you redundant while you’re on furlough or afterwards”.

If you need to close your business, a place of work or you have a reduced requirement for employees to perform work of a particular kind, you may ultimately have no option but to make redundancies. Alternatively, you may simply have decided that you want or need to restructure your business, which may also lead to redundancies.

Normal employment law rules continue to apply, even in this unprecedented situation, so ensure that you follow a fair redundancy process to avoid unfair dismissal or discrimination claims, including: having a genuine redundancy situation; having a clear rationale for the restructure/redundancies; identifying appropriate selection pools; fair selection criteria; meaningful consultation for a “reasonable” period, exploring ways to avoid, reduce or mitigate redundancies; and considering the availability of suitable alternative employment.

If you propose to make 20+ employees redundant “at one establishment” in a 90-day period, additional collective consultation obligations apply, including:

• Submitting an HR1-Form to the Secretary of State within the prescribed timescales (namely, at least 30 days before issuing 20-99 notices of redundancy and at least 45 days before issuing 100+ notices of redundancy).
• Identifying “appropriate” employee representatives to consult with. If you recognise a trade union in respect of the affected employees, you must consult with the union representatives. If not, you can either consult with existing representatives who have appropriate authority (e.g. a staff consultation forum) or elect new representatives.
• Commencing consultation “in good time” and for a minimum period before the first dismissal takes effect. (The minimum periods are the same as for the HR1.)
• Giving various prescribed information to employee representatives.
• Consulting with a view to reaching agreement, although you may not ultimately do so.

Breach of collective consultation obligations can result in compensation payments of up to 90 days’ gross pay each affected employee and failure to submit an HR1 may result in prosecution and a fine, on summary conviction, for a company and/or officers of a company.

Although the minimum consultation periods are not required where “special circumstances” apply and COVID-19 may well constitute special circumstances, employers are still expected to do all they reasonable can to consult, so you are not “off the hook” and could still risk a penalty if you fail to comply.

If you know before or during furlough that redundancies are likely to be required, you may want to start (and possibly even complete) the consultation process during furlough so that the government covers your wage costs during that time,  especially where extended collective consultation periods apply. Although the government guidance does not specifically state whether consultation during furlough counts as “work”, we consider that is unlikely.

Although carrying out consultations remotely may be difficult, especially when some staff are on furlough and some are at work/working from home, try to consult as fully and “normally” as possible. Write to employees to arrange meetings at convenient times via Zoom, Skype, Facetime or telephone, ensure that employees are informed of each consultation meeting’s agenda/subject beforehand, take notes during meetings and follow up meetings in writing, including circulating and agreeing those notes.

If you do not formulate your restructure or redundancy proposals until after furlough, you will need to start consulting at that stage.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.