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Preparing for the end of Furlough: The steps HR teams need to take

By 02/09/2021September 7th, 2021COVID-19, Finance, HR News, Natural HR, Payroll

The Coronavirus Job Retention Scheme, better known to us as the furlough scheme, was announced at the start of the COVID-19 pandemic in March 2020 and was introduced to protect UK workers when they had to stop working and minimise the threat of mass redundancies due to the global pandemic.

Now, after over a year of supporting the UK economy and saving an estimated 11.6 million jobs at the cost of £66bn, the scheme will officially be retired from September 30th 2021, 4 weeks from today.

With that in mind, Natural HR has put together this article on preparing your company for the end of the furlough scheme.

What’s happening on September 30th?

After two months of reduced government contributions, the scheme will end on September 30th 2021, which for businesses means that any furloughed staff will automatically resume the job they were doing before they were put on furlough from October 1st, 2021.

Importantly, as you work in HR, you must take steps to be prepared for this date as you could face several legal issues if you fail to re-onboard your workforce correctly. For instance, if any changes are being sought to your returning employees’ employment terms, they will need to be managed and implemented correctly within the employment documentation.

Financial considerations for the end of the furlough scheme

The first step in preparing for the end of the scheme is to get the data that will allow you to make informed decisions about the next steps.

Despite the government support programs, the COVID-19 pandemic is still leaving countless business owners facing financial difficulties. Therefore when preparing for the end of furlough, you must first consider several financial related issues when deciding on what preparations to take for the end of the furlough scheme, including:

1) How are your sales and revenue income looking? You’ll want to access your company data, which shows your revenue stream from October 1st 2021, onwards. More so, from this, you can work out what the impact of bringing furloughed staff back to a 100% company-paid salary will be.

2) Are there any areas where you can reduce expenditure? Suppose the first consideration has highlighted a cash-flow issue. In that case, you’ll want to consider what savings can be made. Specifically, those that are non-essential and could free up cash whilst minimising both overheads and expenses. This could cover everything from a freeze on annual salary increases and bonuses to a recruitment freeze and pause on company social events.

The 4 Steps to Prepare your workforce

The next step will be to prepare your workforce, and the business itself, for the return of staff to the company. This can be broken down into 4 distinct tasks:

1) Inform your staff: The first thing you’ll want to do is give all your staff an official and documented letter informing them of when they are expected to return to work. This letter will include when their first day of work is, their location – office or home, and any other relevant company information. It’s important to remember that unless a notice period was specified in the original furlough agreement, there is no legal period of notice for employers to give to their employees.

2) Update your payroll: The next step will be to inform your payroll team to update the system as from October 1st, you will be the sole contributor to your employee’s salary. Remember, if you’re not paying your employee their entire salary on this date, you will be in breach of your employee responsibilities.

3) Consider costs: Similar to the point we explored before, you’ll want to consider potential savings, including ways to keep costs down in the immediate future with possible pay freezes or a halt on new hardware expenditure as two examples. However, you must check your employees’ contracts because if they are entitled to a yearly salary increase or training budget, you must get their agreement before implementing the changes.

4) Encourage staff communication: Staff who have been furloughed would not have been in regular contact with you, their team or the wider business since the start of the pandemic; therefore, there’s a good chance they’ve missed a lot of company updates. You need to make sure that your staff feel comfortable and are prepared to come forward with any concerns, questions or issues that they may have regarding their return to work.

What if you need to consider redundancies or layoffs?

The final step in preparing for the end of the furlough scheme is to work out what course of action your company will take if there is no job for your furloughed staff to come back to after completing the previous steps.

Suppose you’ve assessed your company’s situation and you’ve discovered that your business cannot bring back all your staff from furlough. In that case, you may want to consider redundancies as a final option.

But as with any incident of redundancies, you must follow procedure, or you could face unfair dismissal claims. To begin with, you’ll want to consider what form of layoff or redundancies would be most suitable for your company from October 1st 2021. There are 2 options:

  • Short term layoffs or shorter working patterns: If your planning has shown that you’ll return to pre-pandemic levels in a few months, then you could consider either short term layoffs or reduced working hours, with the end goal being a return to pre-pandemic levels once the business has returned to normal.
  • Redundancies: Whilst this will be everyone’s least preferred option, as it could limit the number of services your business can offer, if there isn’t enough work and you don’t anticipate there to be for some time, it could be unavoidable.

If you do choose redundancies, you must fulfil your legal obligations as a business. First, there must be a genuine redundancy situation – namely, there is no longer a need for the employee’s role at the company.

You will then have to follow a detailed procedure in which you assess the roles at risk from redundancy, look for alternatives such as reduced hours or reassigning people to other positions and invite those employees at risk from redundancy to consultancy meetings. At the end of this process, employees must be told if their roles have been selected for redundancy and allowed to appeal the decision.

Natural HR would advise that with either option, you consult the ACAS helpline for advice on what options to take and how to undertake the process to ensure that you remain legally compliant.

Please note: While we here at Natural HR work with HR professionals every day, we are not lawyers. This post is a high-level overview of the changes to the Coronavirus Job Retention Scheme coming into place at the end of September 2021. This post should not replace sound legal advice available from professional solicitors or employment lawyers.