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The final furlough: Your obligations from September 30th

Unless there is a dramatic change in Government policy, 30 September will be a major milestone in the UK’s post-pandemic economic journey, as the Coronavirus Job Retention Scheme (CJRS) finally comes to an end. David Sheppard, an employment lawyer at Capital Law, considers what this means for employers currently using the scheme…

Universally referred to as the furlough scheme, it has undoubtedly served as a critical lifeline for businesses and employees’ livelihoods from the outset of the pandemic and commencement of lockdown on 23 March 2020.

The CJRS was a truly historic level of government intervention in the UK’s economy and labour market, created at speed during a national emergency. For the bulk of the period since March 2020, the taxpayer has funded the wages for millions of employees up to 80% of their normal pay, capped at £2,500 per month.  At its peak in early May 2020, 8.9m employments were furloughed.

As the CJRS reaches its final weeks, the latest statistics for 30 June 2021 indicate that approximately 1.9m employments are still furloughed, whether in full or partially. The total bill for the UK was then £67.4bn and is still rising. To put this astronomical figure in context, the UK’s entire defence budget for 2020/21 was £44.6bn.

The fact that almost 2m employments were still furloughed by the end of June 2021 inevitably means that many jobs face a sudden cliff edge end in government support on 30 September. Employers will be faced with difficult decisions whether to continue such roles in absence of furlough support, or reduce working hours, pay or make other changes to terms and benefits.

Whilst the scheme has undoubtedly staved off mass unemployment, redundancies are still most likely across the hardest hit sectors, such as hospitality, high street retail, travel and performing arts, which still continue to be significantly restricted compared to pre-pandemic levels.  No indication has yet been provided by the UK Government that a transitional scheme, such as the defunct Job Support Scheme which was last proposed in November 2020, will be put in place to support still struggling sectors from 1 October 2021.

It’s therefore crucial that employers planning for post-furlough workforces are aware of their obligations in implementing any restructuring and how to navigate the many pitfalls when implementing significant organisational and contractual changes. This includes:

  • entering collective consultation (where it is envisaged that adverse changes to terms or redundancies will impact 20 or more employees within a period of 90 days) and engaging with employee representatives
  • employees’ entitlement to statutory guarantee pay where there are lay offs or short-time working
  • engaging individual redundancy consultation
  • adopting fair and objective selection criteria (to minimise the risk of liability for unfair dismissal claims and collective redundancy claims on a large scale)
  • correctly calculating redundancy packages, and processes for facilitating voluntary redundancies

David Sheppard is an employment lawyer at Capital Law.