UK-based businesses and employers could be at risk of increased discrimination claims as the Government furlough scheme begins to wind down.
The Furlough scheme implemented by the Government is due to end on 30 September 2021. Since the Coronavirus Job Retention Scheme, or Furlough scheme as it’s commonly known, first began in March 2020, it has prevented many businesses from having to make redundancies in the face of the COVID-19 pandemic. With the furlough scheme now coming to an end, employers will need to consider other ways to minimise overheads while navigating the potential long-term reduction in work and income.
In April 2021, there were a reported 3.4 million employees on furlough through the Coronavirus Job Retention Scheme. The industries with the most employees on furlough were predominantly those in the hospitality, travel and creative sectors. Businesses with beverage serving activities had the highest take-up rate for the furlough scheme (70%), followed by hotels and accommodation (65%), and passenger air transport (55%).
As businesses begin opening their doors again in line with the easing of restrictions, we expect to see a reduction in furlough numbers. However, this reduction in employees on furlough may not necessarily translate to an increase in employees being back in work.
The increase in redundancy rates in the UK during the COVID-19 pandemic has been faster than during the 2008-2009 economic downturn. This data highlights the need for employers and employees to make sure they are aware of the potential side-effects of the furlough scheme coming to an end.
A Review of the UK Furlough Scheme
Formally known as the Coronavirus Job Retention Scheme (CJRS), the UK furlough scheme was put in place by the Government in March 2020 to try to support businesses impacted by the Coronavirus pandemic.
The COVID-19 pandemic is a major economic shock that has had, and continues to have, a significant impact on the UK labour market. The Government furlough scheme was introduced as a way to help business owners to mediate the economic shock of the pandemic. This programme would allow employers to furlough staff and claim up to 80% of employee salaries (up to £2,500 including NI/pension contributions).
An overview of the Coronavirus Job Retention Scheme timeline
In July 2020, the Coronavirus Job Retention Scheme moved to a flexible model that allowed employers to bring employees back to work on reduced hours while still being able to claim the CJRS for the normal hours not worked.
In September 2020, further changes were made to the furlough scheme. Employers would be able to claim up to 70% of employee salaries (up to £2,187.50) while also needing to top this up to 80% with a 10% salary contribution.
In October 2020, the required employer contributions increased by another 10% meaning employers would have to contribute a total of 20% of the furloughed employee salary. The Coronavirus Job Retention Scheme would then cover the remaining 60% (up to £1,875).
To help incentivise employee retention rates and reduce redundancy, the Government also introduced a one-off Job Retention Bonus in October 2020. The Job Retention Bonus was introduced to allow employers to receive a one-off bonus of £1,000 for each furloughed employee who was still employed as of 31 January 2021.
The furlough scheme was due to end in October 2020. However, it was decided that it would instead be extended until at least March 2021. In light of the furlough scheme being extended, the Job Retention Bonus was withdrawn in November 2020.
In March 2021, it was announced that the furlough scheme would be extended until the end of September 2021.
Potential increase in unfair dismissal as furlough ends
As the September date draws closer, concerns for unfair dismissal and redundancy based on discriminatory reasons increase. Recent studies have found that almost half (44%) of businesses have faced employee dispute claims with complaints including injury, stress and illness at work.
As businesses approach the difficult decision of whether to make employee redundant post-furlough, they could be at risk of increased unfair dismissal claims. In recent months, we have already seen cases of employees being unfairly made redundant during the COVID-19 pandemic when they could have been offered furlough.
The likely rise of discrimination claims following the end of furlough
At Ten Legal, we have noticed an increase in employees enquiring about unfair dismissal claims after being made redundant following employer decision to no longer offer them furlough.
We anticipate that the number of employee discrimination claims will increase when the furlough scheme ends, as many employers may choose to make employees redundant as a way to save costs during this financially difficult time.
Figures from recent research into the UK furlough scheme further increases concerns surrounding the likelihood of employers unfairly dismissing employees when the Coronavirus Job Retention Scheme ends in September. These findings highlight the need for employers to exercise caution when making employees redundant to ensure that they are not unfairly dismissing employees for discriminatory reasons.
Women most likely to be on furlough than men
Across the UK, a higher percentage of women were placed on the furlough scheme than men with 2.17 million females being on furlough at 31 March 2021 compared with 1.99 million males.
Further research into the gender experiences of furlough found that women furloughed under the Coronavirus Job Retention Scheme were more likely to be furloughed for longer periods than their male peers.
Young people at higher risk of furlough and unemployment than older age groups
The furlough scheme also saw the under 18 age group being the age group most likely to be placed on furlough for both females and males.
Further research by ONS also found that the number of young people employed declined the most for industries such as accommodation and food service activities and arts entertainment and recreation. The industries that saw the largest declines in the number of young people employed were those that were most affected by the pandemic. When looking at employees on zero hour contracts, a higher proportion of young people moved from employment to unemployment when compared to older age groups (17.6% vs 7.5%).
These findings could suggest that young people were being unfairly dismissed due to the financial impact that the COVID-19 pandemic has had on these industries.
Higher than average redundancy rates for disabled employees
The ONS report also highlighted a large difference in redundancy rates when looking at disability. Of all employees recorded as disabled during July to November 2020, 21.1 per thousand were made redundant, comparative to 13 per thousand of non-disabled employees.
The rate of redundancy for disabled employees was also significantly higher than the average redundancy rate, regardless of disability status, which was 14 per thousand. This makes the redundancy rate for disabled employees higher than the UK average by 6.9 points.
The correct process for making employees redundant after the furlough scheme
When making employees redundant after the furlough scheme, it is important for you to follow the correct process for redundancy. As an employer, you cannot discriminate against your employees when deciding whether or not to make them redundant. It could be considered discrimination if, for example, you decide to make an employee redundant because they are disabled and at increased risk of contracting COVID-19 or they need to take extra precautions with social distancing.
After reviewing research by ONS and other sources, it is evident that there are differences in furlough and redundancy rates for employees of particular demographics. This could be a sign that employees are being unfairly discriminated against during the furlough and redundancy process.
Following a correct and fair redundancy process
Nobody likes to think about making their employees redundant. But if your organisation needs to cut costs and reduce overheads, making redundancies can be one way to save money as a business.
If you do choose to make redundancies within your business, it is important that you treat your employees fairly and follow the correct redundancy process. Not doing so could be considered unfair dismissal and may lead to further problems for your company.
Redundancy happens when you dismiss an employee due to:
- The actual or intended closure of the business
- The actual or intended closure of the business at a particular location
- Your business no longer need employees to perform that specific role
However, redundancy is a fair reason for dismissal. However, the dismissal process and decision must also be conducted in a manner that is fair and free from discrimination.
Selecting employees for redundancy
If you or your business needs to make staff cuts following on from the COVID-19 pandemic, you may want to start the selection process by asking all employees if anyone would be willing to agree to voluntary redundancy. This blanket request means that you are not singling out any individual employees and, therefore, minimises the risk of employees being selected for redundancy based on discriminatory reasons.
You can also select employees for redundancy by using the last in, first out method, or by selecting employees based on experience and job capability. If you have identified a particular department that is no longer required or performing to the required standards, you could also make redundancies based on department.
However you choose to select employees for redundancy, it is important that each employee is fairly selected. You need to ensure your redundancy process does not discriminate against any of your employees.
Examples of unfair selection for redundancy
You should not select employees for redundancy based on their individual circumstances or based on personal factors. For example, selecting employees for redundancy based on the following factors could be considered unfair dismissal:
- sexual orientation
- maternity leave, birth, or pregnancy
- working pattern
When selecting employees for redundancy, make sure that your reason for terminating their contract does not relate to any personal factors, such as those stated above. If it does, your employee may be able to file an unfair dismissal claim against you.
How we can help you with your redundancy process
Before your business begins the redundancy process, you should gain legal guidance. Our friendly and experience Employment Law team will help you review your redundancy process to make sure it follows a correct and fair procedure.
If an employee has raised an unfair dismissal claim against your company, our employment lawyers can help you. We will review the case and explain how we can support you in this case to ensure the best result for your business.
Get in touch today to find out how we can support you with your employment law queries or requirements.