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Businesses advised to proceed with caution regarding new furlough rules

Ann Frances Cooney, Legal Director at Addleshaw Goddard

Following the Chancellor’s announcement on the extension of the furlough scheme, questions have been raised regarding the implications for businesses.

Ann Frances Cooney, Legal Director at international law firm Addleshaw Goddard, who has specialised in employment law for over a decade and has been advising businesses on implementing furlough schemes during the coronavirus pandemic, suggests that employers  looking to take advantage of the Government’s plans to extend the furlough scheme to October should do so with a degree of caution.

She said: “While it’s great to see there is no cliff-edge ending to the furlough scheme which has provided a lifeline to nearly a million businesses since March, the Chancellor’s announcement raises further questions for employers.

“With the financial burden of the Coronavirus Job Retention Scheme now set to be shared between the Government and employers, the Chancellor has not yet clarified what this split will be. Further guidance is expected to be published by the end of the month, and businesses are keen to understand what measures are being put in place to support employers who may struggle to share the burden in order to avoid a wave of redundancies further down the line.

“Some businesses, come August, may simply not be in a position to contribute any level of financial support to furlough pay hopeful and it is not clear that provisions are being made to safeguard such businesses and the needs of their employees.”

The Government announcement revealed that the furlough scheme, which has supported 7.5 million jobs since the COVID-19 pandemic began, will be extended for an additional four months – to the end of October – and will allow for a partial return to work for furloughed employees.

The Chancellor pledged to ensure that employees would not be adversely affected by the cost of the scheme, with the level of support – 80% of salaries covered, capped at £2,500 – remaining the same. However, with the financial burden on the Government vast, employers will also be expected to share the burden of financial support from August.

Cooney continued: “The updates announced are likely to provide further relief to many, and the option for businesses to bring back furloughed staff on a part-time basis will undoubtedly be welcomed across the board to help kick-start the economy. However, this too poses questions around the take-home pay for employees. For example, will staff continue to be covered up to 80% of their monthly salary through the scheme or will they simply be limited to a part-time wage?

“We expect the guidance to address how salaries will be covered in such a scenario – for example, whether or not their contribution to the scheme will be greater than if their staff did not return to work on a part-time basis. It poses a potential headache for employers who may soon be faced with disgruntled staff who have remained working throughout the pandemic feeling short-changed compared to their furloughed colleagues, who may receive the same wage for zero or for fewer hours. Until the guidance is available later this month it will be difficult for employers to plan with any certainty.

“It will be interesting to see whether employers will be able to balance their workforce by placing all members on a part-time furlough, or whether wages will be too adversely affected to do so.”

The Chancellor confirmed that the extension of the scheme would apply throughout the UK, but with England actively encouraging a return to work throughout the summer months, and Scottish Government advice remaining unchanged, Cooney is expecting questions from businesses which are unable to reopen.

“In England, some businesses will be able to reopen and begin generating revenue to help support their staff payments under the new rules. However, this may not be the case in the rest of the UK and if lockdown continues in its current state north of the border, it may be more difficult for Scottish businesses to fund their part of furlough pay. Businesses outside of England will be keen to understand if they can access a greater level of support, or if they could be responsible for a smaller percentage of furloughed staff wages if they cannot return to work, in order to prevent redundancies due to a lack of funds.”

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