At present the furlough scheme is set to end on 30 April 2021, but will it? With varying news reports abounding as to whether furlough might be extended and how long for, it is unsurprising that businesses are becoming increasingly frustrated with the limbo effect this is creating, particularly those in the hospitality and leisure sectors.
What is Furlough?
Furlough is the practical effect of the Government’s Coronavirus Job Retention Scheme. The same is designed to allow employers to place staff on temporary leave (furlough) for a period of no less than 3 weeks. The employee is paid 80% of their salary (up to a maximum of £2,500.00 per month, with the discretion of the employer to top up the same) but must not work for their employer during any one furlough period. It is possible for the same employee to be furloughed several times.
It is also possible for the employer and employee to agree a “flexible furlough” where the employee works some of their usual hours but not all. The furlough scheme pays 80% of the wages for those hours not worked.
Who can claim it?
All businesses in the UK have the right to claim on the Job Retention Scheme for members of staff who were on the payroll as at 30 October 2010. Members of staff include all employees, workers, zero hours staff, agency workers and apprentices. Other schemes apply to self-employed sub-contractors who may find their status (and financial position) changes as a result of IR35 applying in the private sector as of, presently, 6 April 2021.
When will we know what will happen?
All eyes are on the Budget on 3 March 2021 although it is possible that measures could be announced sooner.
What happens when furlough ends?
Naturally businesses will have to plan for this event and, for those who have had to close completely, consider bringing key staff back prior to the end of the furlough scheme to help business owners in the re-start process and prepare for the return of the remainder of the workforce.
Doubtless there will be more staff than work, at least initially. It will still be possible and, in many instances, unavoidable to make staff redundant whilst on furlough and for some, although an option no one wants to actively consider at the moment, a very practical measure to avoid exponential losses in the first months of trading properly again. Further, what constitutes a weeks’ pay for the purposes of redundancy calculations will likely increase again on 6 April 2021 so if mass redundancies are unavoidable there might be some financial sense in making a start on this now since furloughed employees’ redundancy payments are based on normal pay not furlough pay and consultation periods vary depending on the number of employees expected to be affected.
It is widely predicted that the unemployment figures will rise dramatically following any announcement made as to the end of furlough and it is anticipated that there will be a rise in the prevalence of zero hours contracts as businesses try to steady the ship.
There will be businesses that already know that they will not be able to survive post the closure of the job retention scheme and those businesses might consider making enquiries of Insolvency Practitioners and lawyers now to ensure that the process is managed properly and with the least exposure to any liabilities.
Furlough and the Job Retention Scheme is an evolving situation, for up to date advice call to book an appointment.