Keely Rushmore: How the change to the furlough scheme will impact employers

The news that a significant proportion of businesses are contemplating redundancies as the furlough scheme winds down is perhaps not a surprise.

Based on the new rules set out by the government, employers are now being asked to contribute 20% towards the salaries of those whose wages are being subsidised by the state. To date, many employers have held off implementing restructures, with the safety net of the furlough scheme giving them an opportunity to assess the needs of their business as they move back to towards normality. However, even those who are expecting their business to bounce back to pre-pandemic levels may well have incurred irrecoverable costs during the pandemic.

As a result, many businesses are now focussing on how they can maximise profitability and reduce losses moving forward. As part of this, employers are likely to consider whether they can cut their staffing costs. In fact, a recent survey by the British Chambers of Commerce of 250 companies with staff still on furlough in July found that 18% are likely to make staff redundant as the cost of retaining them increases.

As a basic starting point, any redundancy must be genuine and fair, with a decision only made after a reasonable process has been followed. This will involve consulting with staff, with employers considering the practicalities of consulting with employees on furlough, and considering the alternatives to redundancy. These could include utilising the furlough scheme, while still available, consideration of alternative roles, part-time working, salary reductions, and temporary lay-offs and/or short-time working.

It is crucial for employers to also bear in mind that furloughed workers have the same legal rights as any other employee, including protection from unlawful discrimination and unfair dismissal. What this entails is that prioritising furloughed staff for redundancies above others, may not be an option.

Furthermore, employers should take care when considering roles which are occupied by disabled workers. This may include workers with long-term health conditions that fall within the legal definition of a disability. Reports also indicate that women have made up a disproportionate number of those on furlough leave, leaving open the possibility for discrimination on the grounds of sex.

Finally, any employer proposing 20 or more redundancies in a 90-day window at one establishment need to tread especially carefully and be mindful of the requirement to consult collectively with employee representatives, in addition to carrying out individual consultation.

The process of making staff redundant needs careful planning. Adding the furlough scheme considerations into the mix only further exacerbate the need to proceed in a calculated and well-considered manner.

Keely Rushmore is employment partner at Keystone Law