Could furlough ending risk redundancies

Furlough Scheme Coming to an End

The furlough measures, introduced by the government to help employers protect their employees by covering their employees’ wages during the difficulties of the pandemic, are set to end on 30th September 2021.

Should Furlough Be Further Extended?

In May 2021, over a million workers came off the scheme that was designed to help businesses stay afloat by paying a large percentage of the employees’ wages. The number of people relying on furlough is at its lowest since the pandemic hit the nation last Spring.

However, HMRC figures from the end of May tell us that 2.4 million people still needed the government’s help to support their income.

Over the next few months while the scheme eased off, businesses were required to pay a higher portion of their workers’ salary, with the government contributing less. However, with some parts of the economy still struggling, the businesses in these sectors may not have the funds to keep up with the furlough scheme phasing out.

Changes to the Furlough Scheme

From 1st July, employers had to start paying 10% of their furloughed workers’ normal wage, plus national insurance and employer pension contributions, and the government will contribute 70%.

Then from 1st August, employers were required to chip in 20%, and the government’s contribution decreased further.

Overall, the government has supported over 11 million jobs since last March, spending £66bn on the Coronavirus Job Retention Scheme (furlough).

But now that the economy is starting to get back on its feet, the government are putting some of the responsibility back on employers. Non-essential shops, businesses in the hospitality sector and eventually night clubs have now reopened, meaning that a lot of employees have finally been able to return to work.

Could These Furlough Changes Result in Redundancies?

Well, economists have warned that the decreasing financial support from the government could hit some businesses hard.

According to the Office for National Statistics, 35% of the businesses that temporarily closed do not have much confidence of surviving, as the furlough scheme comes to an end.

The worry is that history will repeat itself, as the easing of furlough measures last July-September led to a record-high of 181,000 redundancies as employers started panicking.

The Treasury stands by the decision, claiming that its furlough scheme is one of the most generous schemes in the world, and that the funding it will offer until the end of September is ‘substantial’.

Advice for Employees

Have you been made Redundant? Wosskow Brown can Help with your Settlement Agreement

If you are an employee who has been on furlough and your employer has notified you that they may have to end your employment, you may be asked to sign a Settlement Agreement.

This is a contract between you and your employer to resolve any employment law disputes, bringing your relationship to a formal end.  These disputes may be something as simple as your employer no longer being able to afford your employment.  By entering into a Settlement Agreement it gives you both the security that no legal action can be taken by either party as a result of the loss of employment.

In order for a Settlement Agreement to be legally binding, the employee needs to seek the service of specialist legal advice, and this is a service that Wosskow Brown is providing as our highly experienced employment team can help employees navigate the difficulties of finalising the end of their employment.

Advice for Employers

Are you considering making redundancies?  Wosskow Brown are here to help.

From an employer’s perspective, Settlement Agreements allow the employer to be assured that the employee has left in a clean manner and limits any exposure to any unnecessary litigation. In addition, it affords you as an employer the opportunity to acknowledge and show appreciation for the service of the employee.

If you are an employer who is in the difficult position of having to make redundancies, then Wosskow Brown’s experienced team are on hand to guide you through every step of the process, from ensuring the redundancy procedures are fair to drafting any Settlement Agreements that may be required.

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