Apr 28

How to exit from furlough….what is your strategy?


1. Return to business as usual

Bringing employees back to work on their previous terms and conditions will be the easiest but most expensive option and will most likely be used by employers who anticipate that they can revert to ‘business as usual’ in the short term.

How do you do this?

Give your employees a minimum of 48 hours’ notice to return to work, although notice in mid-June, assuming the government does not extend the furlough scheme further, will be sensible.

2. Reduce payroll costs without making redundancies

Extending the furlough leave scheme without the benefit of the government grant, on the same or revised terms, is possible provided employees continue to agree. It is also possible, with consent, to furlough new employees or rotate employees to ensure that elements of the workforce do not become deskilled.

How do you do this?

Provided employees agree to an extended furlough period, a new or extended furlough agreement will be required. If an extended furlough scheme is presented as a formal alternative to redundancy, a formal redundancy consultation will be required.

Where an employee has a contractual lay off without pay provision in their contract, this could also be used. The employer should consult with employees first and give reasonable notice of any lay off. Be mindful of the fact that employees who have been laid off for four or more consecutive weeks, or six weeks in any 13-week period, are able to claim a statutory redundancy payment in certain circumstances.

3. End furlough and bring employees back to work on reduced hours and pay

Employers wish to retain trained employees and avoid the costs involved of making redundancies where:

• business has resumed but a full-time commitment is not required
• a return to business as usual is likely in the medium to long term
• furlough resulted in a reduced number of employees being kept in work but now the available work needs to be spread more evenly across all staff.

How do you do this?

Where furloughed employees are returning to a workplace where employees have already agreed a pay-cut in exchange for reduced hours, they may anticipate that this is what will be expected of them and be willing to agree to a change.

If not, a reduction in hours and pay is a change to terms and conditions and requires employees’ agreement. It is important to gain individual consent in writing from each employee using a variation of contract letter.

Where an employer has a contractual right to impose short-time working, this could be used. The employer should consult with employees first and give reasonable notice to avoid being in breach of contract. The statutory lay-off provisions mentioned above also entitle employees who have been kept on short time for four or more consecutive weeks or six weeks in any 13-week period to resign and claim a statutory redundancy payment in certain circumstances.

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

Where an organisation wants to retain all their employees but needs to buy some time to allow the business to return to normal trading conditions, this may provide a solution.

How do you do this?

The employer will inform all staff that it will consider applications for sabbaticals and reserve the right to decline requests if, for example, an employee is in a business critical role.

Where a sabbatical is agreed, its terms and the employee’s consent to them should be recorded in writing.

5. Make redundancies

In the absence of any extension to the furlough scheme there are likely to be many organisations who will have no option but to make redundancies.

Starting redundancy consultation during the furlough period

The guidance from HMRC on furlough provides that ‘your employer can still make you redundant while you’re on furlough or afterwards”. There is no specific guidance to state that collective or individual redundancy consultation can be carried out during furlough, but it is widely considered that either form of consultation can be commenced during furlough leave.

Assuming collective consultation can be undertaken during the furlough period, this is likely to be used by employers who:

• know they need to make redundancies, but could reduce that number by using the furlough scheme to absorb part of the cost of consultation
• want to push for other changes as an alternative to redundancies (see above) but need to be able to act quickly if employees do not agree.

How do you do this?

Collective consultation is required where an employer proposes to dismiss 20 or more employees “at one establishment” in a 90-day period. If fewer than 20 redundancies are anticipated, only individual consultation is required.

Consultation must start “in good time” to allow the relevant discussions to take place and a minimum period before the first of the dismissals takes effect. The minimum periods are:

• 30 days, where between 20 and 99 employees are to be dismissed
• 45 days, where 100 or more employees are to be dismissed.

There is no confirmation that the current situation will mean that these minimum consultation periods can be dispensed with, but it may be possible in some cases. It is important the employer can demonstrate it has engaged in collective consultation so far as it can do in the circumstances.

Given the current circumstances, where there may be large numbers of employees furloughed and so not attending work, the consultation process will be more challenging and so the impact on timelines will need to be borne in mind and zoom (or equivalent) consultation meetings will need to be held.

It is important to dot all the ‘i’s as getting the collective consultation requirements wrong can expose the employer to significant financial liabilities, including a “protective award” of up to 90 days’ pay per affected employee.

Individual consultation is required at the end of collective consultation. The ordinary redundancy principles apply during this time. In order to avoid a successful claim for unfair dismissal arising out of a redundancy situation, there must be:

• a genuine redundancy situation (most likely to be satisfied in these circumstances)
• adequate warning and consultation of affected employees
• a fair “pooling” and selection process
• consideration of alternative employment
• a fair procedure.

An employee must have two years’ service in order to claim unfair dismissal, although no period of service is needed if they assert, for example, that their selection was discriminatory.

Employees who leave at the end of such a process will be entitled to notice, statutory redundancy pay and whatever enhanced redundancy pay the employer may provide.

Starting redundancy consultation at the end of furlough

This is likely to be used because:

1. it transpires that either sort of consultation during the furlough period is not allowed, or
2. where the employer does not formulate its proposals until after the end of the furlough period.

How do you do this?

The details of the consultation process and periods are as set out above. If this approach is followed and assuming consultation starts on 1 July 2020, dismissals could not take effect until 1 August or 16 August at the earliest (depending on the number of employees involved). For redundancies of less than 20 employees, the dismissal could take effect as early as mid-July.

Please contact nicola.goodridge@goodhr.co.uk or on +44(0)7917878384 if you need any assistance at all or simply just require more detail than is set out here…