Furlough payments are set to change, is your business ready?
At the moment, workers earning up to £2500 a month are paid 80% of their normal pay, which their employer can then claim back through the furlough scheme. From 1 July, although the worker will continue to receive 80% of their pay, the employer will only be able to claim back 70% and will have to pay the additional 10% themselves.
There will be further changes to furlough payments between August and 30 September, as the percentage government pays will reduce to 60%, leaving employers to make up the 20% shortfall.
Employers still have to pay National Insurance and pension contributions. In addition, furloughed workers are entitled to sick pay, annual leave and maternity pay at standard rates.
The job retention, or furlough scheme has already cost £66bn but has been a lifeline for workers and businesses unable to trade throughout the pandemic. The scheme was set up to protect jobs and to date it has achieved that. In March 2020 at the start of the pandemic, it was feared that as many as one in 10 workers would lose their jobs. Instead, the rate of unemployment is less than one in 20. As many as 11.5 million jobs have been supported.
These huge costs make it essential that the economy opens as quickly as possible now. Government hopes that by making it more expensive to furlough workers, it will encourage employers to take more people back and only furlough those where there genuinely is no other option.
Unfortunately, some employers will find that they cannot afford to keep workers on after the government support ends and many fiscal bodies are expecting a rise in unemployment.
Sarah Naylor, employment law specialist at Atherton Godfrey, commented: “There are currently no plans to extend the scheme beyond the end of September. If that remains the government’s position, employers will be faced with the difficult decision of taking their workers back or making them redundant. Even though workers may have been furloughed for long periods of time, they will still be entitled to redundancy pay at the regular rate and that will need to be factored into any decision making.
“My advice to employers who think they will have to make redundancies is to get legal advice as soon as possible.”
A further aspect for employers to consider is whether workers want to go back to their pre-pandemic working pattern. Furlough has given people the opportunity to re-evaluate their work-life balance. It may be that they have decided they want to reduce their hours or even take early retirement when furlough ends.
There is also an issue around mental health, as raised by Dame Andrea Leadsome, who said: “For some people they’re just terrified, so it’s like ‘I’ve been on furlough so long I really can’t quite face going back to the office’”.
If you need advice about redundancy, employment contracts or workers rights, our employment law experts are here to help. Call 01302 320621 or email email@example.com