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COVID-19: extension of furlough scheme

12 May 2020

The Chancellor has announced today that the Coronavirus Job Retention Scheme, is to be extended by a further four months, to 31 October 2020.

The scheme will remain unchanged until 31 July, an extension of an additional month. From 1 August, changes will be made. Full details of these are promised by the end of May, but look set to include some scope for employees who are furloughed to work part-time. At present, a furloughed employee may not carry out any duties for their employer.

Significantly, the Chancellor referred to introducing a requirement that employers share the cost of the furlough scheme. The intention appears to be that employees will continue to receive 80% of their salary, but employers will be reimbursed at a lower level.

Whilst extension of the scheme in any form is to be welcomed, and will provide much needed support for businesses as they seek to resume business after lockdown, the imposition of additional costs is likely to be a major concern for employers who are facing severe financial pressures. This change may therefore lead to early decisions to make redundancies.

If 100 or more dismissals by reason of redundancy are contemplated, then employers are obliged to consult with employee representatives for a minimum of 45 days before notice can be given. This would mean starting that process no later than early September. If more than 20 but fewer than 100 redundancies are planned, then a minimum of 30 days consultation is required.

The ability to allow part-time working will assist businesses which have been fully closed as they transition to full opening. It is unlikely to be helpful to businesses which are already operating but do not envisage being at full capacity for some time and therefore have workers on furlough who are simply surplus to requirements, and likely to remain so for some time.

The delay in further details is unhelpful for employers who will wish to plan ahead and communicate with their staff.

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