Navigating the end of furlough: what employers need to know

The Coro­n­avirus Job Reten­tion Scheme (CJRS) was announced in March 2020 and, since being intro­duced, has helped to pro­tect mil­lions of jobs, with 8.9 mil­lion fur­loughed dur­ing its peak in May 2020.

A total of 1.3 mil­lion employ­ers had made use of the fur­lough scheme, as of June 2021, but despite an esti­mat­ed mil­lion peo­ple still ben­e­fit­ing from the scheme, the gov­ern­ment will be bring­ing it to an end from 30 Sep­tem­ber.

With this date fast approach­ing, many employ­ers will have already decid­ed whether they can now afford the 80% of fur­loughed work­ers wages which have gone unpaid (20%) or paid for by the gov­ern­ment (60%). For many cur­rent­ly on fur­lough, this may unfor­tu­nate­ly end in redun­dan­cy, but there will also be many work­ers wel­comed back into the fold.

Preparing workers for the return from furlough

For those that have been on fur­lough since the scheme was first intro­duced, it is pos­si­ble that they will have been out of full-time employ­ment for well over a year. Emma Par­ry, pro­fes­sor of HR man­age­ment at Cran­field School of Man­age­ment, says: “Some employ­ers are pre­sum­ing that fur­loughed employ­ees can just pick up where they left off and that’s not the case.

“Employ­ees that have been off work for a while will take some time to read­just and might be anx­ious or wor­ried about the idea of com­ing back to work. So it is essen­tial that employ­ers think about how they pre­pare staff for this.”

A lot may have changed with­in the organ­i­sa­tion over this peri­od, so bring­ing peo­ple back up to speed will be impor­tant. Con­sid­er­a­tions could include intro­duc­ing a phased return or pro­vid­ing addi­tion­al train­ing.

Rebuild­ing rela­tion­ships will also be a key con­sid­er­a­tion, accord­ing to Par­ry. She says: “It’s impor­tant not to for­get peo­ple that haven’t been fur­loughed dur­ing this time. In some cas­es there is a mis­con­cep­tion that fur­lough has been like an extend­ed hol­i­day, so you may need to deal with ten­sions between fur­loughed staff and those that have worked through the pan­dem­ic.”

Pos­si­ble solu­tions could include offer­ing well­be­ing days or extra time off for those that have worked through­out the past year and encour­ag­ing con­ver­sa­tions to help address the “us and them” men­tal­i­ty.

On the oth­er side of the equa­tion, some fur­loughed staff may feel less val­ued than those that were retained. “Com­mu­ni­ca­tion is impor­tant,” Par­ry says. “Make sure the line man­ag­er and employ­ee have an open dis­cus­sion about changes in the organ­i­sa­tion and how their role now fits in. But also ask the employ­ee what they want to achieve in their career and find a way for­ward that works for both.” 

She adds: ”Employ­ers also need to see this as an oppor­tu­ni­ty to reassess how they think about their work­force and keep their peo­ple engaged.”

Avoiding redundancies

While the aim of the CJRS was to keep peo­ple in employ­ment, redun­dan­cies may have to be con­sid­ered at busi­ness­es that have not recov­ered finan­cial­ly from the pan­dem­ic. But this is not the only option avail­able to employ­ers.  

Bind­mans employ­ment lawyer Tina Din warns: “Redun­dan­cy is a cost­ly exer­cise, from a finan­cial, emo­tion­al and time per­spec­tive. All options should be con­sid­ered when look­ing to avoid them.” This could involve see­ing if employ­ees would be hap­py reduc­ing their hours, tak­ing a pay cut or tak­ing extend­ed leave, she advis­es. “With the fur­lough scheme com­ing to an end it is now eas­i­er to make those adjust­ments to con­tracts, if the employ­ee agrees.” 

Dur­ing the 2008 reces­sion many organ­i­sa­tions moved staff onto part-time con­tracts or intro­duced pay freezes to help avoid redun­dan­cies. Par­ry adds: “The advan­tage of this is that, when things pick up again, you’ve got an engaged work­force there already that you can quick­ly bring back on board.”

Anoth­er con­sid­er­a­tion is the poten­tial to free up cap­i­tal by end­ing expen­sive office leas­es. “If home work­ing is fea­si­ble, it could save enough to help you avoid mak­ing a redun­dan­cy,” Din says.

If your com­pa­ny has to let peo­ple go, it is impor­tant to be aware of your oblig­a­tions as an employ­er. She adds: “This might involve indi­vid­ual con­sul­ta­tions or col­lec­tive con­sul­ta­tions for groups of 20 or more employ­ees. You will need to ascer­tain whether any­one wants to take vol­un­tary redun­dan­cy and be mind­ful of dis­crim­i­na­tion impli­ca­tions.”

It is also impor­tant to note that, as of Decem­ber 2020, pay­ments for statu­to­ry and con­trac­tu­al notice peri­ods are no longer cov­ered by the CJRS.

Potential fallout

Although much of the econ­o­my has now reopened since the major­i­ty of coro­n­avirus restric­tions were lift­ed on 19 July, there are still indus­tries which are feel­ing the impacts of Covid.

The avi­a­tion sec­tor con­tin­ues to be bad­ly affect­ed, with Heathrow record­ing a fall in pas­sen­ger num­bers of 80.5%. As a result, air­lines remain one of the largest bene­fac­tors of the fur­lough scheme. 

British Air­ways issued an inter­nal memo to staff last month which warned that when fur­lough ends, “our pay costs will steeply increase, and any increase in costs is bad news”. 

There are cur­rent­ly no new gov­ern­ment sup­port mea­sure­ments planned and, although the fur­lough scheme was pre­vi­ous­ly extend­ed, it is unlike­ly this will hap­pen again. 

Some have sug­gest­ed that the end of fur­lough could help to address the cur­rent labour short­ages in the UK, which have seen the num­ber of job vacan­cies hit a record high of 1.03 mil­lion. How­ev­er the CBI’s direc­tor gen­er­al Tony Danker warned that “fur­lough end­ing is not the panacea some peo­ple think will mag­i­cal­ly fill labour sup­ply gaps”. 

Par­ry explains: “It’s a very sim­plis­tic view of the prob­lem and the labour mar­ket does­n’t work like that in real­i­ty. On one lev­el, peo­ple may not have the skills, moti­va­tion or the will­ing­ness to fill the jobs that are vacant.  But equal­ly, not all of the labour short­ages are a result of fur­lough; there is a melt­ing pot of fac­tors that are cur­rent­ly con­tribut­ing to it.” 

Employ­ers will there­fore have to con­sid­er care­ful­ly how they nav­i­gate the end­ing of the fur­lough scheme to ensure their actions are in the best inter­ests of their employ­ees and the organ­i­sa­tion.