Pitfalls of the Furlough Scheme
The rollout of the UK Government’s new Coronavirus Job Retention Scheme (Furlough Scheme) was very welcome news to employers, with nearly 9 million employees thought to have been registered for the scheme to date.
However, the Furlough Scheme involves many potential pitfalls, including the following:
- The scheme may not unwind in line with business need – it could end before customer demand returns, which could leave employers with little time to make urgent cost-savings (see below).
- Many employers will fall foul of the rules against working whilst on furlough – in particular, they may lack adequate evidence that employees have agreed to the scheme or are not working.
- Businesses are not focused on what their revised strategic goals are in light of the Furlough Scheme – many employers are approaching the Furlough Scheme in a reactive way, but should not forget that if changes are needed, this is an opportunity to try to improve a business.
- If on-going cost savings are required when furlough comes to an end, there is little time to work out what that will involve, with options including:
- cost-savings which avoid harder options, such as redundancies;
- reducing hours and pay
It may be that employers consider softer options in the shorter term, keeping the situation under review and in time implementing longer-term solutions where necessary.
- If redundancies or changes to terms and conditions of employment are proposed, this may give rise to collective consultation obligations in respect of which it may already be too late to start that process in the hope that it will be completed before the furlough comes to an end. As such, businesses may need to plan for consultation potentially outlasting the Furlough Scheme.
- Even if collective consultation is not envisaged, there is little time to prepare for changes and reorganisation, particularly complex reorganisations which are targeted at improving the business. Again, businesses can mitigate this by starting to consult with employees at an early stage; even if this dialogue needs to evolve, this evolution will happen more easily once it has started.
- The Government is not helping as there is no clarity on when the Furlough Scheme will come to an end, except that there is no firm commitment beyond 1 June. This could lead to knee jerk reactions if the furlough period is not extended; employers can avoid this by making contingency plans now which assume that the Furlough Scheme will not be extended.
- The first 2 days of the online portal have seen a significant number of technical issues, including:
- Employers have only 30 minutes to file a claim and must do so manually unless they have 100 employees or more
- It is not clear whether, when calculating average earnings, this should be done by reference to calendar days or working days
- Employers are only able to claim once per month, meaning that if they claim and subsequently furlough a number of other employees, there will be a delay before they can claim for those employees.
If it would be helpful to discuss any of the above pitfalls in more detail, or any other issue relating to the Furlough Scheme, please contact a member of the Kemp Little Employment team.
Find all our Covid-19 related advice here.
Share this blog
- Adtech & martech
- Artificial intelligence
- EBA outsourcing
- Cloud computing
- Complex & sensitive investigations
- Cryptocurrencies & blockchain
- Data analytics & big data
- Data breaches
- Data rights
- Digital commerce
- Digital content risk
- Digital health
- Digital media
- Digital infrastructure & telecoms
- Emerging businesses
- Financial services
- KLick DPO
- KLick Trade Mark
- Open banking
- Software & services