Travlaw partner and head of employment Ami Naru sets out how travel firms might adapt to the Job Retention Scheme’s recent changes
As employers turn their attention to the longer-term impact of the pandemic on the travel industry, the economy and their businesses, many are asking the question, ‘What comes after the scheme ends?’ and, ‘is “flexible-furlough” right for me?’ I have set out some key considerations for employers and highlighted the key points on “flexible-furlough” and furlough “exit-strategy”.
When the Coronavirus Job Retention Scheme was introduced back in March, it was considered a lifeline for many businesses, particularly in the travel industry. Some 8.4 million workers, including many in the travel industry are having 80% of their salaries paid for by the government – up to £2,500 a month. The scheme was intended to last until the end of July.
In early May, by way of another lifeline, the chancellor extended the scheme until the end of October, with guidance to follow. What was known at that stage was the employers would have to contribute towards the wages of their furloughed staff. Many employers feared the worst and considered that, unless the travel industry picked up pronto, furlough was a waiting room for those who would most likely be made redundant.
On Friday May 29, the chancellor Rishi Sunak announced the following key changes to a new “flexi-furlough” scheme starting from the July 1st. Detailed guidance about the new flexi furlough is expected to be published on 12 June.
What we know about flexi-furlough
- June 10, 2020 – The last date upon which employers can place employees on furlough for the first time.
- June 30, 2020 – The furlough scheme will close to all new entrants. Thereafter furlough is only available to those employees that have been on furlough for a full three-week period prior to June 30.
- July 1, 2020 – “Flexi-furlough” introduced. Employees are able to return to work part time and be paid for those hours by the employer, but also remain on furlough and receive furlough pay for the contracted hours they remain at home on furlough.
- August 1, 2020 – Employers will pay cost of employers National Insurance (NI) and auto enrolment pension contributions. The government will continue to pay 80% of wages, capped at £2,500 for furloughed staff.
- September 1, 2020 – Employers will have to contribute 10% of furloughed wages for staff, plus NI and pension contributions. The government will pick up 70%, capped at £2,187.50 of a furloughed employee’s wages.
- October 1, 2020 – Employers will have to contribute 20%, capped at £1,875 of furloughed wages for staff, plus NI and pension contributions. The government will pick up 60% of a furloughed employee’s wages.
It is fair to say that, if employers are considering bringing back workers on a part time basis and keeping them partially on furlough, then payment calculations are likely to be complex and time consuming, so payroll will need plenty of time to work out the sums and external assistance may be required.
Employers are often focused on the CJRS application process, but it is also worth remembering that while the idea of keeping staff on furlough may be attractive to the employer, any variations to working hours will need to be agreed with the employee. This agreement needs to be in writing as HMRC, will be doing retrospective audit checks. Now that workers can undertake some work on furlough from July 1, agreements will need to reflect if this is the case.
Even with the additional lifeline of the “flexi-furlough” scheme, for some employers this will not be enough and for some it will simply delay cost-cutting strategies that unfortunately many employers in the travel industry will face. This is a time to think outside the box about the options available, while recognising that there will be situations where redundancies cannot be avoided.
The Covid-19 situation may have highlighted areas where a business could expand and grow, as well as areas which may need to be curtailed. Consideration should therefore be given to whether staff could re-train or up-skill into business-critical roles, or to new roles to service customers’ new demands.
Businesses may also wish to review contractual relationships with agencies and contractors as a means of saving costs on labour resources. Salary reductions, normally starting at the top, and other changes to terms of employment may well have to be discussed and agreed. Different types of leave, such as sabbaticals, parental leave and unpaid leave could also be considered a means to fill the gap, until the travel industry picks up.
During all these difficult times clear communication and buy in from staff is key. After all, they want their employer to come out the other end just as much as business owners do.
