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5 furlough liabilities employers can avoid

With the Chancellor’s announcement last week on the extension of the Coronavirus Job Retention Scheme until the end of the October now is a great time for businesses to take stock and think about how they plan for the future and avoid potential pitfalls.

Two of People Puzzles brilliant People Directors Sharon Bridgland-Gough and Jim Verity talk us through the options business owners should consider.

1. Act now if you wish to continue to use the furlough scheme

While we are still waiting the finer details, the key points of the extension of the scheme are: –

  • The scheme will continue without any changes until 31 July 2020. You can continue to place employees who are currently not on furlough on to the scheme until the end of the July 2020.
  • From 1 August 2020, employers will be able to bring employees who are on furlough back on a part-time basis.
    • Employees will continue to receive the 80% of their current wages up to £2,500 a month; but
    • Employers will be expected to contribute towards the salaries of their furloughed staff. We do not know yet what this contribution level may be or whether the scheme will only be extended for those employers who provide employees with some working hours.

Some things to think about

  • If your furlough letter to employees included an end date of on or before 30th June 2020, consider if you wish to extend beyond the previous date. You may wish to be pragmatic and not extended beyond the end of July 2020 until details of the extension are clearer.
  • Make sure that you communicate and get employees written agreement to the extension, particularly if you have an existing agreed with a specific period of furlough.
  • If you have “topped up” employees’ salaries, consider if you can afford to continue to do this in the extension. If you are going to cease the “top up” make sure that this is crystal clear in the new or extended furlough agreement.

2. Avoid big build-up of annual leave entitlement and requests

Employers can specifically request their furloughed employees to take their annual leave while they are on furlough leave, subject to the usual statutory notice period, which is at least twice as long as the amount of leave an employer wishes the furloughed employee to take (for example 2 days’ notice for 1 day’s leave), unless the contract says something different.

Ask furloughed employees to use some of their annual leave entitlement now may be up to the amount that they would have accrued at this stage in the annual leave year. This will avoid a big build-up of annual leave and the potential extra costs (e.g. additional overtime for those covering absent employees on annual leave) when the business needs to start to get going again.

Engage with furloughed employees and explain to them the reasons for wanting to take the annual leave. The purpose of annual leave is to allow for rest and relaxation and while current restrictions may prevent furloughed employees from going aboard or away overnight, they may still be able to “rest and relax”.

If you offer contractual holiday (i.e. holiday beyond the statutory minimum of 5.6 weeks per year) you could consider agreeing with furloughed employees a reduction in their contractual holiday to reflect the fact that they have been on furlough.  You can only do this via agreement with the employee which must be agreed in writing. The employee still retains their right to 5.6 weeks annual leave.

3. Pay annual leave correctly

Employers can use the furlough grant to subsidise holiday pay, but they must make the difference up if the employee is entitled to a higher rate than their furlough pay.  The means the employers must “top up” the holiday pay themselves during any annual leave including on bank holidays and that holiday pay must be at their usual holiday pay rate.

If the employer is unable to fund the difference, then it is not reasonably practicable for the employee to take their annual leave during the furlough period.

4. Start redundancy consultation now

All employers should be planning now for the future, and if the likelihood is that in the absence of the furlough scheme you will need to make redundancies start consultation now and consider a slightly extended notice period of those furloughed employees who are fairly selected for redundancy.

This extended notice period will be helpful in providing time to look for a new role while receive 80% of their normal salary (up to £2,500 per month) and may even allow them time to develop new skills. It might be that the individual may decide to return to education and receiving pay until the new academic year may be extremely useful.

Consider providing those selected with additional online training or even CV workshops. The possibilities are endless.  Just make sure that the training is relevant, it is agreed between the employer and employee, and that the furloughed employee receives at the least the national minimum wage when they are undertaking the training.

And maybe during the notice period the situation changes, perhaps business picks up, an employer can go back to the employee and advise that there is no longer a need to make their job redundant. Make sure that the employee is advised in writing of this!

5. Unsure about the future trading conditions – buy yourself some time

Not sure what trading conditions may be like in a few months’ time and you are not sure if you will need to make redundancies? You could buy yourself some time by talking with your employees about this now and thinking about alternatives for when the furlough scheme ends such as: –

  • Continuing with your own version of furlough but without the benefit of the government grant
  • Bringing employees back to work on reduced hours or pay
  • Bringing employees back to work on reduced pay but the same hours
  • Offering unpaid or part paid leave or sabbaticals

Whatever you do make sure you follow all relevant consultation requirements and ensure all agreements are in writing and signed by the employee or their representative.

…… and a note on training

Employers are allowed to train employees who are on furlough leave, so look at opportunities to upskill or provide furloughed employees with new skills or knowledge that may be needed when you return to work.

If there is training, you think would be of benefit – talk to your employees about it. Or, even better, maybe ask them if there is any training they think would be beneficial and could be done whilst on furlough Leave.

If you need an extra pair of hands over the next few weeks, you want advice or a consultation, please do call us as we would love to help.

Please get in touch with us at hello@peoplepuzzles.co.uk or call 0808 164 5826 if you would like to arrange a suitable time for a complimentary 30 minute call with one of our brilliant HR Directors.

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