Options available to businesses when furlough has ended

The furlough scheme is currently set to end on 30th June 2020.  What then for businesses who need to manage staff but operating on partial trading hours, reduced amount of work or with financial constraints?

This article sets out the options available to businesses in these challenging times.  It will cover: 

• Short Time Working
• Changing days and hour of work
• Lay offs
• Redundancies
• Using Paid or unpaid leave


Short Time Working

Short time working is where you reduce the working hours of your staff by less than 50% of their normal working hours. Where you do so, you are effectively varying the contract of employment. Pay and leave entitlement will be pro-rata’d accordingly. Please see below on Consent.

Changes to the Contract of Employment

You may need to make changes to your staff’s working days or hours either on a temporary or permanent basis.

Employees are contractually entitled to have their existing Terms and Conditions of employment honoured when they return from furlough. Contracts cannot be changed unilaterally.

However, you can ask staff to agree the changes, which could be either reducing working days and hours and receiving pro rata pay or agreeing to do the same working hours but at a reduced rate of pay.

You must consult with employees and ask them to sign to confirm agreement to changes via a variation to their contract of employment.

Lay-offs

This is where you have no work to provide staff, so you ask them not to come to work. A lay-off is a complete workless day. Where you lay off, staff are entitled to claim from you a Statutory Guarantee Payment (SGP) which is currently £30 per day. It can only be paid for up to 5 days in a 3-month period (£150 in total).

Unlike redundancy, the employment contract continues and is not terminated, therefore there being a job to return to when possible.

There is no limit to how long you can lay someone off for, however, once it is longer than 4 weeks in a row or 6 weeks in a 13-week period, they can claim redundancy and redundancy pay. You can counter their claim by providing them with work (even for a short period of time).

To be eligible for SGP, they must have been employed continuously for 1 month (includes part time workers), be available to work, not unreasonably refuse alternative work and not have been laid off due to industrial action.

Do you have contractual consent?

Whether you can use Lay Off and Short Time Working (LOST) depends upon their contract of employment. If there is a LOST clause in the contract, then you can use it and do not need consent, but you should still consult. By its very nature, there is no prescribed notice, but as much notice as you can give the better.

If there is no clause in the contract allowing you to use lay off or short time working, legally if you enforce it, it will be a breach of contract. In this situation, you need to consult with staff and seek their consent. Why would they consent? If the alternative is dismissal via redundancy, then they may consent.

Once consent is given (or if you are relying on a contractual clause), put the changes in writing to vary the contract of employment.

Redundancies

Redundancy is one of the 5 fair reasons to dismiss. Redundancies may be necessary where the following occurs:

  • the business is closing (or moving location)
  • the business has carried out a restructuring exercise and there is no longer a need for a role(s)
  • where a business needs to reduce its headcount; where they need fewer people to carry out a role

Whatever the reason for the redundancy, you must follow a fair and meaningful consultation process.  Failure to do so, could result in a claim for unfair dismissal where the individual has greater than 2 years service.

The statutory obligations on employers are:-

  • to pay a statutory redundancy pay (greater than 2 years service)
  • to give a notice period (or payment in lieu of notice)
  • to consider the option to move into a different role (if available – you do not have to create a role)
  • to give time off to find a new role.

If you are contemplating redundancies for staff currently on furlough, you can run the redundancy process whilst they are on furlough and serve notice.

Using Paid or Unpaid Leave

Staff may request to take paid leave as an alternative to lay off.

You may choose to require staff to use some of their leave. If you do so, you must give twice the notice as the leave you wish them to take, for example 1-week leave will require 2 weeks’ notice.

Leave must be paid at their normal pay.


Please remember, although these are unprecedented times, employment law still applies.