Furlough Scheme Payments changing July 2021

11 June 2021 | Jatinder Tara

A reminder that Furlough Scheme Payments is changing July 2021 and what are the alternatives?

Although the furlough scheme is to continue to 30th September 2021 but from 1st July 2021 the furlough scheme payments provisions will be changing with the financial contributions from the employer starting to increase. 

Effective from start of July 2021, the government grant will be reducing to 70% (up to £2187.50) and the Employer would be required to make up the 10%, so that the employee will still be getting their 80%.  It is a mandatory requirement for the Employer to pay their 10% contribution. 

From August to end of September the grant reduces again to 60% (up to £1875) and again the Employer is required to cover the shortfall, but this time the percentage is 20%. 

Employers will still have to pay the cost of Employer National Insurance Contributions and pension contributions, together with holiday pay for any holiday that the employee takes (ie the difference between 80% and 100% pay to 30th June and difference between 60% and 100% of pay from August to end of September).

Employers may feel that the increase of this financial burden upon themselves is not sustainable thus may give rise to terminate employment to avoid paying any extra amount but that could trigger redundancy and additional financial costs to the business-like redundancy pay, notice pay and accrued holidays.

However, despite the above there are other viable options to consider before jumping into redundancies, as briefly highlighted below.

lay off/short time working

From 1st July the Employer could remove staff off furlough and implement lay off/short time working arrangement provided in a signed contract of employment there is a term that would allow the Employer to place their employees on lay-off /short term working.

Where the contract of employment has no such term /clause, the employee can mutually agree to this arrangement following a meaningful consultation meeting but there should be no improper conduct by the Employer to get the employee to agree to this arrangement that could suggest breach by the Employer of the implied duty of mutual, trust and confidence.  

Where continued furlough be it full and flexi is not want the Employer wants because of cash flow issues but say there is a likelihood that work may increase significantly in the coming months, the Employer could consult with their employees to reduce their working days/hours on a temporary basis to overcome cash flow concerns and then for employees to be rewarded financially by an one-off payment or salary increase when the financial stability of the business is more stable but a well drafted policy would be required to reflect that such financial rewards are discretionary and subject to the business meeting its financial projections and ensuring that where it is payable it is fair and non-discriminatory.

Where lay-off applies, the employee (subject to eligibility conditions) will be entitled to guarantee pay for 5 workless days in any 3-month period amounting to a maximum of £150 ie £30 per day. Also, with lay- off the employee could inform the Employer in writing to be made redundant if the employee has been laid off for 4 weeks in a row or 6 weeks in a 13 week period. (1)

Another option to furlough is reducing working hours permanently by mutual agreement where the Employer via meaningful consultation with staff agree permanently to reducing working hours to avoid being made redundant. However, many employees may want redundancy hence it is important to get proper HR guidance on this.

In this pandemic there has been winners and losers and where businesses have been thriving and are over worked and understaffed then a secondment could be an option so as to ‘loan’ your staff to an industry provider who could benefit from an extra set of hands and / or the employees skill set.  The employee also benefits as they would continue to receive a salary and still be employed by their current Employer with continuity of employment. Again, a well drafted secondment agreement between the Employer and Third-Party business will be required that also includes a written agreement by the employee to agree to the secondment with a full explanation of employee rights when secondment ends.

Finally, another alternative as a temporary measure is for the employee to use up their annual leave entitlement that they may have been built up considerably during furlough.

Where the employees refuse to agree to taking their annual statutory holidays, the Employer could insist that the employee takes their outstanding annual statutory leave entitlement by giving twice as much notice as the holiday itself as per the provisions within the Working Time Regulations 1998.

Where employee remains on furlough and takes holidays whilst on furlough, the Employer must continue to pay 100% holiday pay and from July the Employer can only seek a reimbursement of 70% holiday pay from the furlough grant which will be further reduced to 60% from August onwards.

(1)- https://www.gov.uk/lay-offs-short-timeworking

As you can see from the above there are many options available to employers for further advice and guidance on the matter, please do not hesitate to call our advice-line team on the usual number or  01455 852028.

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