End of the UK Furlough Scheme – What's Next for Employers

Locke Lord LLP

On September 30, 2021, the UK Government’s subsidized furlough scheme, the Coronavirus Job Retention Scheme (“CJRS”), finally came to an end after 18 months — having been scaled back over the past few months from covering 80% of salary (up to a cap) at its height. At one point in 2020, 8.86 million UK employees were on furlough, and the CJRS is generally viewed as having succeeded in its goal of preventing hasty, widespread terminations.

But what do UK employers need to consider in the post-furlough world? There may be overstaffing issues, given that some jobs will be retained only because of the availability of CJRS funds. There may also be questions about reintegrating employees into work, and the workplace, who in some cases, have been on furlough or partial furlough for many months. And many employers are wondering how far they can go in requiring their employees to be vaccinated — a controversial topic on this side of the Pond also.

If the return from furlough leaves employers overstaffed, the UK requires employers to go through some procedural hoops before implementing a reduction in force, if employers seek to minimize their risk of unfair dismissal claims from employees with over two years of service (capped at the lower of a year’s salary and about £90,000). Employers must be able to demonstrate that they fairly selected the employees to be made redundant. Therefore, employers should not automatically pick from the employees who have been furloughed. Instead, employers should document the bases of their decisions by reference to a structured set of objective selection criteria. Employers are also required to go through a process of individual consultation over a two-to-four week period, and a collective consultation process (with unions, if any, or employee representatives) if 20 or more redundancies are proposed. Employees with two years of service are entitled to a statutory redundancy payment of £544 per year of service, with an increase for older employees. The procedures may sound complex, but with guidance, it is a very well-trodden and reasonably straightforward exercise.

What if employers don’t want to reduce headcount, but the business has transformed over the past 18 months and returning employees need to carry out wholly or partially different roles? The first step is to look back at employees’ employment contracts and see what flexibility the contracts have reserved to adapt job responsibilities or change roles entirely (however broad the language appears to be, there are obviously limits, especially where the new role is less senior). As always in the UK, employers should discuss any proposed changes with employees first before proceeding to implement the changes — both because it is good human governance and because it may minimize the risk of constructive dismissal claims alleging that employers exercised their contractual rights in an unreasonable manner (i.e., breach of the implied duty of mutual trust and confidence). If, however, there is minimal flexibility reserved in the employment contracts, then employers may consider initiating the redundancy process outlined above, with an offer of alternative employment as well.

Part of the return from furlough may involve a return to office work, on a full-time or hybrid basis, for employees who have not worked in their offices for over a year. We previously addressed the right to request flexible working arrangements and the merits of a preemptive explanation of the perceived benefits of office work when announcing a full or hybrid return to the office. However, one issue that has recently received significant publicity is whether employers can or should require employees to obtain the COVID-19 vaccine. In the UK, there is no law that expressly permits employers to mandate vaccines, except in the care homes sector. Yet, in a recent poll, many employers said that they planned to do so anyway. In addition to vaccine mandates, employers are considering alternative methods to encourage employees to voluntarily obtain the COVID-19 vaccine. For example, if permitted under the employees contractual arrangements, employers may consider compensating unvaccinated staff who fall sick with COVID-19 only the statutory sick pay, rather than their full salary, during any period of absence — an approach implemented by one of the large UK supermarkets.

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Locke Lord LLP

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