What happens to furloughed workers when the government scheme ends?

The coronavirus outbreak has not only caused thousands of deaths around the world but has caused untold damage to the economy: on 12 August it was confirmed that the UK economy had fallen into recession.

Many businesses have struggled to maintain revenue and relied on the government furlough scheme to pay staff, meaning they could keep employees on payroll but temporarily delegate payment of wages to the state.

Previously, the scheme paid employees paid 80 per cent of their salary (up to a maximum of £2,500 per month) but this has now gone down to 70 per cent, with the employer paying 10 per cent of the salary.

Next month the scheme will be wound down altogether. This made sense when employees were being encouraged back to the office and hospitality was reopening, and supported by Eat Out To Help Out, but on 22 September stricter measures were reintroduced, which have led to renewed concerns about unemployment rates once the scheme ends.

Chancellor Rishi Sunak is expected to unveil a replacement for the furlough scheme on Thursday in an attempt to avoid mass redundancies.

But what happens to those on the furlough scheme when it is wound down? Will they be entitled to any compensation if their employer can still not have them back full time?

When the furlough scheme was first announced by Chancellor Rishi Sunak on 20 March it was only made available to businesses until 31 May.

It has since been extended to the end of October, but has been winding down since the start of August.

From 1 September, the Coronavirus Job Retention Scheme will pay 70 per cent of the wages for workers placed on leave up to a cap of £2,187.50 a month, down from 80 per cent up to a maximum of £2,500 a month. Employers will also start paying 10 per cent of the furloughed employees' wages.

Then, the next stage will begin in October, when the government will pay 60 per cent of wages up to a cap of £1,875. The employers' share of the bill will then go up to 20 per cent.

So far, Rishi Sunak has ruled out extending the scheme past October. 

However, on Thursday he is expected to unveil an emergency job protection plan to replace it, in a bid to protect millions of jobs in sectors hit by the latest Covid-19 restrictions. 

Pressure has been mounting from a number of high-profile figures asking the government to reconsider ending the current furlough scheme.

Andrew Bailey, the governor of the Bank of England, has directly challenged Sunak to “stop and rethink” ending furlough in October, suggesting some sectors, such as hospitality, may need targeted help in the coming months.

"[Furlough] has helped manage the shock, to firms and to labour [but now] the use of it, as far as we can tell, is more concentrated," Bailey said at a British Chambers of Commerce webinar . "I think it is therefore sensible to stop and rethink the approach going forward.”

Similarly, Kate Nicholls, of trade body UK Hospitality said the sector will see a ''steady stream of job losses'' if more support isn't given, following the implementation of a 10pm curfew across pubs and restaurants on 22 September.

“The government must immediately announce an exhaustive package of financial support, otherwise our sector is facing ruin,” she said. “Employment support must be extended. The furlough scheme is already wining down and it comes to a complete halt at the end of October.

“Unless it is extended for our sector, businesses are inevitably going to have to make staff redundant. We are looking at a steady stream of job losses for six months, otherwise.”

While Sunak appears steadfast on ending the scheme, there have been reports that he is considering replacing furlough with German-style wage subsidies.

“Government officials are examining whether the state can subsidise the wages of employees who can work at least 50 to 60 percent of their normal hours,” the Financial Times states.

The Guardian has also shared similar reports, adding that Sunak has delayed an announcement on 23 September, saying that he would extend four government-backed loan guarantee schemes to November, because he now wants to draw up a wider support package.

For the millions of people relying on the scheme to pay rent and bills, it is obviously concerning thinking about what will happen to your income when the scheme is wound down – whenever that might be.

Lucy Lewis, partner at HR law firm, Lewis Silkin, tells The Independent: “The idea is that employees will be able to come back to work. The scheme is designed so that employers don’t need to make redundancies and then recruit a new workforce once the crisis is over – their existing workforce will be ready and waiting to resume work.”

But of course this relies on the business being in a stronger position than a few months ago, and for many this will not be the case.

CIPD says that when the scheme ends businesses will either be able to bring employees back full-time or choose one of three options: agreed reduced working hours with some or all staff, furlough staff for a further period (at the expense of the business not the government) or consider redundancies.

Lewis says of bringing employees back: “This is easiest but most expensive option. It is likely to be used by employers who anticipate that they can get back to near-normal trading conditions in the relatively short-term.

If your employer wants to reduce your hours, CIPD says this will need to be in writing. They should also be clear about the reasons for reducing your working hours.

If trading conditions have not improved and staff cannot be taken back, Lewis says the usual redundancy rules will apply including a formal giving of notice and reasons why you are being made redundant.

“This is significant because other European countries that have similar schemes in place are imposing restrictions on employers making redundancies. No such conditions are being imposed in the UK,” she adds.

On 30 July new laws were introduced that mean furloughed workers who lose their jobs will receive redundancy pay based on their normal wage.

Ministers said the move will ensure that furloughed employees receive statutory redundancy pay based on their normal wages rather than a reduced furlough rate.

The changes will mean those furloughed under the Coronavirus Job Retention Scheme are not short-changed if they are made redundant, the government said.

Ministers said the changes will also apply to statutory notice pay and other entitlements, providing some reassurance "during this difficult time".

If your business is making more than 20 people redundant (but fewer than 100 people) they must start collective consultation on the redundancies at least 30 days before giving notice to employees.

A number of businesses have already announced that job losses will occur when the furlough scheme ends, including former Pizza Express boss Luke Johnson, who told Newsnight: “I would estimate of the three million [on the furlough scheme], at least a million … will be made redundant.”

Citizen’s Advice says that employees should be aware they can also be made redundant during the period of furlough before the scheme is officially over.

Employment lawyer Gareth Price of Parklane Plowden Chambers says: “A good employer will maintain good communication with their employees – so it is fair and reasonable for employees to want to know the likely status as soon as possible.”