Extension of employee furlough scheme – what does it mean for businesses and what’s next?

The extension of the furlough scheme until the end of March 2021 provides businesses with a welcome degree of longer-term certainty regarding government support for employees; but how effectively will this extension protect jobs and what are the practical implications for businesses, their employees and former employees?

The extended CJRS will be welcomed by many employers as it has the benefits of consistency and relative certainty until spring of next year. However, given many businesses will have spent months planning for the end of the CJRS, an eleventh-hour extension will require employers to think again about what the right next steps are.

Employers will now need to consider how the extension of the CJRS will impact their business plans, including what (if any) revised communications need to be issued to employees and whether any job cuts can be delayed, prevented entirely or even reversed.

However, the CJRS does not mean that employers can retain furloughed staff at zero cost and continuing with redundancies during the extended CJRS may be unavoidable. Participation in the CJRS does not prohibit employers from making redundancies (although employees may challenge dismissals in the employment tribunal in the usual way).There may also be business or economic reasons which mean that making redundancies rather than placing employees on furlough is the preferable or only option.

In circumstances where an employer anticipates that it will have to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, an obligation to commence collective consultation with the representatives of affected employees may arise (notwithstanding that the CJRS remains in place).

The potential impact on employee wellbeing also cannot be ignored. By March 2021, some employees may have spent an entire year on furlough, away from the workplace and with limited job security.

Employers should not be surprised to see an increase in employees suffering from feelings of anxiety, stress and demotivation and, if they’re in a position to do so, exploring alternative employment opportunities. Employers must remember to check in with their staff during extended periods of furlough, and to put support measures in place where possible.

Finally, and perhaps unsurprisingly, there has been a degree of backlash against the CJRS extension from individuals who were made redundant in the run-up to the scheme’s anticipated end date. Under the extended scheme, employees who were employed and on the payroll on 23 September 2020 and who were made redundant or who stopped working after that date can be re-employed and claimed for. There is no obligation on employers to do this, although they may feel that it is the right thing to do if there is a possibility that the employee could resume their role by next March.

The cost of pension contributions, NICs and accrued holidays will need to be balanced against the benefits of retaining the employee. Employers will need to carefully consider whether the CJRS extension impacts on redundancies it has already notified to employees or implemented, particularly if the closure of the CJRS was relied upon as part of the rationale for redundancies.

What’s next?

The CJRS arrangements are due to be reviewed in January 2021, and employers may be asked to contribute more if the economic circumstances permit, so the 80% government contribution may not last for the duration of the CJRS extension.

The Job Retention Bonus will not be paid out in February 2021 (although a retention incentive has been promised at an alternative time) and the Job Support Scheme has been postponed. The government has said that full guidance on the CJRS extension will be issued on 10 November 2020.

Employers will need to review the guidance carefully and should be prepared to look at their CJRS arrangements again early in the New Year to see whether any changes to the CJRS, such as a reduction in the government subsidy, impact on their approach.

It is recommended that any furlough agreements entered into with employees retain flexibility for the employer to allow for any changes to the scheme.

Bethany Parker is an associate in the employment and incentives practice at Linklaters.