Angus Brewer Business & Tax Consultant

After a year and a half, and multiple iterations and extensions, the ground-breaking furlough scheme (officially the Coronavirus Job Retention Scheme) is set to end on 30 September 2021.

Government data shows that almost three million people have been moved off furlough since March 2021.  Nevertheless, at the end of July, almost two million people remained on furlough or flexible furlough (where employees can be furloughed part-time). 

For the employers of these people, the question remains how to manage their return to work when the scheme ends.
We consider a few options:

Bring furloughed employees back on their pre-furlough terms and conditionsOf all the options mentioned in this article, this is obviously the easiest.  It’s also the most expensive, and so most likely to be used by employers who anticipate good trading conditions and want to retain talent within the business.

Ideally the furlough agreement provides for how the work return process should be managed, otherwise you should give the employee reasonable written notice that they are being brought back from furlough.

For all employees returning from furlough, employers should consider:

  • For example, health and safety risk assessments, taking reasonable steps to ensure a safe place to work, consultation with employees, consideration of reasonable adjustments for disabled employees etc
  • Wellbeing support – time to readjust being back at work?  Are there ways to help them acclimatise – e.g. refresher induction process, training, providing them with a buddy, gradual return to duties, adjusting hours to support different commute times?
Reduce payroll costs without making redundanciesThere are a number of different options for employer seeking to reduce payroll costs without making redundancies.
 
  • Ending furlough and bringing staff back to work on reduced hours and pay

    Might appeal to employers who do not need the full-time commitment of staff, or at least not immediately, but expect a return to normal trading conditions in the medium to long term, and want to retain staff.
     
  • Ending furlough and bringing staff back to work on the same hours but reduced pay

    May be of interest to employers who expect to be able to return to normal trading conditions soon, but perhaps have cash-flow issues due to Covid which makes it difficult to pay employees their usual full rate of pay.  Consent may not be forthcoming from employees who are agreeing to a reduction in pay for nothing in return, although may take a broader view if the alternative is potential job losses, and decide that it is better to have a job in the current climate than none at all, even if it is on less pay.
     
  • Ending furlough and asking staff to take unpaid or part-paid leave

    May appeal to employers who want to retain their employees (perhaps because they are highly skilled) but need time to allow trading conditions to return to normal.

    Unpaid or part-paid leave would usually be agreed on a purely voluntary basis and any such agreement should be set out in writing. 
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  • Extending furlough without the government grant

    Another option would be to extend furlough without the government grant, with employees agreement, also considering extending to new employees or rotating employees in/out of furlough. This may be of interest to employers who do not have enough work for all their employees but want to keep employees for when normal trading conditions resume and do not want to incur redundancy costs. However, this would be expensive, as the employer would have to bear the full cost of furlough payments. To mitigate this, employers might try to negotiate a lower rate of furlough pay than under the government-backed scheme.

Make redundanciesFor employers that will not be able to afford or do not need all their staff currently on the CJRS, it is time to formalise plans to restructure their workforces. 

In order for any redundancy dismissal to be fair, employers should ensure it is a genuine redundancy situation and a fair procedure should be followed. Some key considerations include:

  • Ensuring sufficient notice is given to employees
  • Making sure employee receives correct amount of redundancy pay and consideration of statutory entitlement
  • Determining the income tax and NIC treatment

The Government has launched a number of employment support services to help individuals who have lost their job as a result of the pandemic – read more here.  

Final CJRS claims and corrections

CJRS claims must be made by 14 October for September claims. If you have made a mistake in a claim this can be corrected within 28 days of claim period end (i.e. before 28 October)

After 28 October, it will not be possible to correct under-claimed amounts but it should be remembered that if you have underpaid a member of staff, they are still entitled to be paid their full cash entitlement for the furlough period. 

If you have over-claimed you must notify HMRC directly and make arrangements to make direct repayment to HMRC: it is a legal requirement to notify HMRC within 90 days.

After the CJRS

It will be important to remember that your last CJRS claim is far from the end of the matter. At the very least you must ensure that the CJRS payments you have received are declared accurately on your organisation’s tax return. If you have not corrected any CJRS errors by the time you come to submit your tax returns, it means that you may end up submitting an incorrect return – which could later cost you dearly – particularly if HMRC takes the view that your errors were “deliberate behaviour”: HMRC can name and shame businesses for such issues.

We recommend that all businesses that have made frequent CJRS claims have an independent review of their processes and claims to help identify claim errors and get them put right. If you have any questions on this, please get in touch.

Please note: This publication is a general summary. It should not replace legal advice tailored to your specific circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.