Furlough scheme extended to 30 September 2021

Deborah Rookes | 05 Mar 2021

INSIGHTS

In December last year, the Chancellor Rishi Sunak confirmed that the Coronavirus Job Retention Scheme (CJRS) was to be extended until 30 April 2021, with the Government continuing to fund 80% of the employee’s salary (up to £2500) for unworked hours. Employers using the scheme are required to pay wages, NICs and pension contributions for worked hours and NICs and pension contributions for unworked hours.

As restrictions continue to be imposed on individuals and businesses, the Government has accepted that there cannot be a ‘cliff edge’ end to the CJRS at the end of April, given the gradual easing of restrictions which we have been told to expect until at least early summer. Last month, the Prime Minister confirmed that the government will “not pull the rug out” from businesses and employees relying on financial support, and this week the Chancellor announced as part of the Budget that the CJRS will be extended until 30 September 2021.

Full details of the rules of the further extended CJRS are not yet available, however, it has been confirmed that furloughed employees will continue to receive 80% of their salary, for hours not worked, until the scheme ends. Employers will remain responsible for wages, NICs and pension contributions for worked hours and NICs and pension contributions for unworked hours. As businesses reopen and the restrictions lessen, employers will be asked to contribute to unworked hours from July onwards, and be required to meet 10% in July and 20% in August and September.

Whilst the CJRS has provided support and allowed many businesses to survive, employers continue to face tough decisions in order to protect their business, and a wave of redundancies seems inevitable as the CJRS begins to wind down. The extended CJRS differs from that originally announced in March last year and employers can no longer claim under the CJRS in respect of an employee who is working out a statutory or contractual notice period. This is likely to prove a major challenge for some small businesses, particularly where employees facing redundancy are high earners and/or have long service. It is not anticipated that this position will change when the updated rules are published, and this could lead to many businesses facing the situation of being unable to afford to retain staff, but also unable to afford to make the redundancies.

In these challenging times, there is an increased risk of employers taking decisions quickly in order to protect their businesses; however this could end up costing far more in the long run if this leads to claims of unfair dismissal. Where redundancies are made, employers must follow a fair process, and in particular ensure a full and fair selection process is carried out. Employers cannot, for example, select an employee for redundancy simply because that employee has been furloughed, whilst others have continued to work. Selection on the grounds of furlough status alone is likely to render a dismissal unfair. Where employers propose to dismiss 20 or more employees, additional (and entirely separate) collective consultation obligations apply, with significant consequences if these obligations are not complied with (the potential award being 90 days actual gross pay per affected employee).