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The furlough scheme winds down - is redundancy planning on the horizon?

Recent research suggests 1 in 5 businesses may opt for redundancies post-furlough

An article published on the Employee Benefits website, discusses the issues facing many businesses now that the furlough scheme is winding down. 

The Coronavirus Job Retention Scheme (CJRS) ends on 30 September, with the government hoping that most workers will be able to return to work. Speaking back in June, the Prime Minister, Boris Johnson said that he didn’t anticipate extending the furlough scheme into the autumn.

Economists are expecting to see an increase in unemployment following the end of the scheme. Redundancies are on the cards since a large number of businesses continue to see the impact of the pandemic - particularly the travel and hospitality industries. 

It’s not really surprising then that a significant proportion of businesses are contemplating redundancies as the furlough scheme winds down and finally ceases at the end of September.

What are the arrangements under the furlough scheme?

The current rules demand that employers contribute 20% towards the salaries of those employees officially on furlough but with the scheme having been extended on 4 previous occasions, the plan is now to encourage businesses to plan for the return to some degree of normality. 

Some furlough scheme statistics (as of 31 July):

  • According to government figures, 11.6m jobs have been supported since the scheme began
  • From a peak of 5.1m in January, there are now 1.6m people on the furlough scheme (source: HM Revenue and Customs)
  • 28% of employers have staff on furlough
  • The scheme has cost around £66bn (according to the Office for Budget Responsibility)

Who is most likely to be still on the furlough scheme?

According to a BBC article published last week ‘Numbers on furlough drop to a new low’, 340,000 people came off the scheme in July. Young workers were the main beneficiaries with 121,600 coming off the scheme in June and July. Of the remaining 1.6m furloughed workers, the demographic tends to be older people and those working in the travel industry.

Will businesses opt for restructure or redundancy?

For companies which continue to be impacted and have staff on furlough, 3 questions will be at the forefront of their minds: restructure, redundancy or do both have to be considered? Furloughed workers will return to full-time work or be asked to change roles, work reduced hours or as a last resort, will be made redundant if employers cannot afford to cover their salaries. A survey of 250 companies, conducted by the British Chambers of Commerce in July, suggests 45 of those polled (18%) are likely to make staff redundant as retention costs are not sustainable.

Jane Gratton, Head of People Policy at the British Chambers of Commerce, said:

“Today’s changes to the furlough scheme will likely result in many thousands of people being released back into the labour market, as employers who are still struggling to recover from the recession are forced to make redundancies and cuts to working hours."

She goes on to say:

“With widespread skills shortages across the economy, some will find new jobs where their skills are in demand, while others will need to retrain for opportunities in a different sector.”

And if your business needs to make redundancies?

Any redundancies must follow the correct redundancy process and be managed fairly. A decision can only be made once the consultation process has been followed through. Employers will need to consider how to consult with furloughed staff and will need to consider any alternatives to redundancy - whether it’s practical to offer an employee a similar role, be offered retraining, a reduction in hours (short-time working), a job-share or a temporary lay-off.

Employers must also be aware that workers on furlough have the same legal rights as any other employee - this includes protection from unlawful discrimination and unfair dismissal. This means that not only furloughed staff must be considered for redundancy - business owners must demonstrate that considerations have been applied to all staff at risk.

Employers should also be mindful of discrimination on the grounds of disability or sex. A number of furloughed staff may be those with long-term health conditions who are classified as having a disability or have been defined as being clinically vulnerable. With women more likely to have been put on furlough (52% of women have been on the scheme whilst only making up 48% of the workforce) there could be a case for sex discrimination. An article on People Management looks at the disproportionate number of women who are on furlough in more detail.

For businesses considering making 20 or more staff redundant, within a 90-day period, employee and/or union representatives will also need to be included as part of the consultation process. 

Where can you get help if your business is looking at a Company restructure or proposing redundancies?

Q&A People Matter has the expertise to guide you through a restructure analysis and any resultant outcomes of that review. Redundancy may form part of that outcome - and we can support you through this process too. Arguably the furlough scheme has added to the considerations any business will need to make to reduce staffing costs. A restructure including proposed redundancies will need to be well planned and executed in accordance with legal requirements.

Contact us if you would like advice from the experts.


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