Extension of furlough scheme to end of September 2021

How much use is still being made of the furlough scheme and what do employers need to know in these last few weeks?

Latest official figures for the furlough scheme (updated on 2 August 2021) show that, as at 30 June 2021, there were 540,000 employers with 1.9 million staff on furlough. On 31 May 2021, the figure was 2.4 million. Since the start of the furlough scheme a total of 11.6 million jobs were put on furlough for at least part of the duration of the scheme.

Some of the sectors with the highest rates of jobs currently furloughed are passenger air transport, travel agency and tour operator activities and photographic, creative, arts and entertainment activities. At the moment, London has the highest level of staff on furlough.

Regarding the practical issues for employers, from 1 July 2021, the Government paid 70% of wages up to a maximum cap of £2,187.50 for the hours the employee is on furlough. Employers had to top up employees’ wages so that they received 80% of their wages (up to £2,500) for the hours they are on furlough. The caps are proportional to the hours not worked.

From 1 August 2021, the Government paid 60% of wages up to a maximum cap of £1,875 for the hours the employee is on furlough.

It is important to be aware of the dates for making claims for payments:

• Claims for furlough days in August 2021 have to be made by 14 September 2021.
• Claims for furlough days in September 2021 must be made by 14 October 2021 and any amendments must be made by 28 October 2021.

From a scheme that was first announced in March 2020 to be only a temporary measure, lasting for three months initially, it will be in place for around 18 months by the time it ends.

Announcing the September extension, the Chancellor said that “There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”

However, the Budget announcement was not the only recent development in relation to the furlough scheme. Furlough fraud has been a concern from the outset and in the last few weeks, we have had the first Employment Tribunal decisions relating to the furlough scheme in the context of redundancy and unfair dismissal.

Extensive furlough scheme guidance

On 5 January 2021, updated Government Guidance was published. It confirmed that employers can furlough employees if they are unable to work or are working reduced hours because of caring responsibilities due to COVID-19. Caring responsibilities include caring for children who are at home because of the closure of schools or childcare facilities and caring for a vulnerable individual in the household.

Extensive Guidance about the furlough scheme and the various extensions have been published and links to some of the Guidance are at the end of this article. Most of the provisions of the extended furlough scheme are unchanged and the key points to note are as follows:

• The furlough scheme is extended to 30 September 2021 and continues to apply across the UK. Flexible furlough is permitted and employers can furlough employees for any amount of time and any work pattern.
• Employers cannot claim for furlough pay for individuals serving notice periods between 1 December 2020 and 30 April 2021 and this includes contractual and statutory notice periods. This provision covers notice periods as a result of retirement or resignation, not just redundancies. Notice pay must be at 100% of pre-furlough pay.
• All employers with a UK bank account and UK PAYE schemes can claim the grant. Employers need to fund NICs and pension contributions.
• An employer can claim for employees who were employed and on their PAYE payroll on 30 October 2020 provided they have made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where an employer has re-employed an employee after 23 September 2020.
• Employees that were employed, and on the payroll on 23 September 2020 who were made redundant or stopped working afterwards can be re-employed and claimed for. However, there are significant legal and practical implications of re-hiring (as well as cost implications) and employers should obtain legal advice before making any decision to re-hire.
• Where consistent with employment law, any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of making a claim. Only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a claim. Updated Guidance reiterates that the agreement must be consistent with employment, equality and discrimination laws and employers should keep a written record of the agreement for five years.

Furlough scheme and Employment Tribunal decisions

Although the furlough scheme may be drawing to a close it will continue to be of significance in the context of unfair dismissal and redundancy claims. There have recently been two Employment Tribunal decisions which considered the issue of furlough and the fairness of a redundancy procedure. There were some particularly interesting comments from the Employment Tribunal judges.

In Handley v Tatenhill Aviation Ltd, the claimant, a flight instructor, was already on furlough when he was dismissed by reason of redundancy on 10 August 2020.

The respondent argued that it was a very small business facing unprecedented challenges arising from the pandemic but that it acted reasonably in placing the claimant on furlough and subsequently making him redundant. The fact that the claimant was furloughed did not prevent the respondent from making him redundant.

The claimant argued that there was no genuine redundancy situation and that the respondent had used the situation as an opportunity to move to a self-employed instructor model at the expense of the taxpayer. He also submitted that it had cost the respondent more to make him redundant than to keep him on furlough.

The Employment Tribunal held that it was a genuine redundancy situation but that the process was flawed in relation to the selection criteria and the way the employee’s appeal against the decision to make him redundant was carried out. It held that the dismissal was procedurally unfair. However, following a different procedure would not have resulted in a different outcome and there was a 100% chance that the claimant would have been dismissed anyway. This meant that there was a 100% Polkey reduction and as the claimant had already received his statutory redundancy payment (and not entitled to a basic award) he was not entitled to any compensation.

In relation to the furlough scheme the Employment Tribunal judge said:

In Mhindurwa v Lovingangels Care Ltd, the claimant was a care worker who was made redundant on 13 July 2020. She had provided live-in care to a vulnerable person who subsequently moved into a care home. In May 2020, the claimant asked to be furloughed but was told that she could not provide live-in-care any longer because of COVID-19 restrictions and she was at risk of redundancy. The claimant did not want to accept the domiciliary care work that was available and she was then made redundant. Her appeal against dismissal was rejected.

The Employment Tribunal held that although redundancy was a potentially fair reason for dismissal, the claimant’s dismissal was unfair for two reasons. Firstly, the appeal process was inadequate. Secondly, the availability of the furlough scheme which the respondent had not utilised. As the Employment Tribunal judge stated:

The whole purpose of the furlough scheme was to avoid lay off of employees because of the effect of the COVID-19 pandemic by providing significant Government support to employers. I am of the view that in July 2020 a reasonable employer would have given consideration to whether the claimant should be furloughed to avoid being dismissed on the grounds of redundancy. Why it was not considered, or not considered suitable in this case is not explained by the respondent.

These are only first instance judgments and do not need to be followed by other Employment Tribunals. However, they provide a useful insight as to the Employment Tribunals’ view about whether the availability of the furlough scheme should be taken into account as an alternative to redundancy and importantly, that it is for the employer to decide how to run their business and whether or not to make use of the furlough scheme.

Useful links

• Government guidance – Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme
• Government guidance – Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme
• Government guidance – Steps to take before calculating your claim using the Coronavirus Job Retention Scheme
• Government guidance – Check if your employer can use the Coronavirus Job Retention Scheme

Contact our employment team if you have need any legal advice about furlough.

This article was first published on 5 November 2020, updated on 11, 18 November 2020, 3 March 2021 and 20 August 2021.