What Are The Alternatives To Furlough?

Gary Green
Gary Green
April 17, 2020

In today's article we're going to outline the alternatives to furlough during the coronavirus crisis.

Despite the introduction of the Coronavirus Job Retention Scheme, you may be looking for alternatives to furlough when it comes to dealing with the downturn. Maybe your staff don't want to be put on furlough. Maybe you can't afford to lose the productivity. Either way, this article will outline your options.

For more information on the furlough process, please check out our articles:

I've Just Been Put On Furlough
How Do You Furlough Employees?

And if you’d like more information about the financial, political and tax changes so far, check out our Coronavirus Tips. And be sure to visit our Coronavirus Update page.

Furlough - Quick Overview

The government scheme was designed to prevent businesses from laying off staff. Instead, they would be placed on "furlough". They stay on the books, they still get paid, but they stay home and don't work for the furlough period.

For some business owners, this might not be possible:

  • The staff might not want to go on furlough (it has to be an agreement between employer and employee)
  • You might not be able to use the furlough scheme (for example it only applies to PAYE staff who were on the payroll in February)
  • It might not suit your business to place staff on furlough (you need them to keep working)

Option 1 - Restructure Contract

If you don't want to use the furlough scheme, but can't afford to pay the employee full salary, you might be able to restructure the contract. If you both agree, you could potentially look at:

  • Reducing hours for reduced pay (week on / week off, 3 days a week, half days...)
  • Taking a temporary pay cut for a fixed period (eg 75% for the next 2 months)
  • Continued to pay salary but a temporary suspension of benefits (bonuses/commission/expenses)

This can be a tricky area legally. You should try to consult with an employment law specialist before making any changes. Please feel free to get in touch if you have any concerns; we can make an introduction on your behalf.

Option 2 - Unpaid Holiday

If your employee agrees, you could offer them unpaid holiday. This would allow you to get their salary cost off the books for an agreed period. They would have the security of knowing they remain employed during the period.

If the staff member doesn't have short-term cash flow problems, this could be a positive for them. With schools closed, perhaps they need to spend more time looking after children anyway.

If you choose this option, make sure you are very clear about expectations:

  • How long is the unpaid holiday for? Will you fix a time period, or treat it as "rolling"?
  • What are the expectations around staying in touch? Do you expect the staff member to check work emails every so often?
  • How will it affect other contractual issues like bonuses, commission, holiday entitlements?
  • What is the employee allowed to do while on holiday? Can he try to get contract/gig jobs in the meantime?

Option 3 - Redundancy

If you don't qualify for the furlough scheme, you might need to consider redundancy. The government has conceded that many businesses will need to make layoffs. But it has made clear that the normal redundancy procedures must be followed.

As a business owner, you need to demonstrate that you took reasonable steps to avoid redundancy. Some of the options in this article would count. So you might need to show that you offered staff short-time working or unpaid holiday.

The redundancy process is quite complicated and is outside the scope of this blog. If you'd like to learn more, check out the CIPD page which has some excellent information.

Final Thoughts

Whatever approach you decide to take during this difficult time, make absolutely sure you are fully compliant with every aspect of tax, finance and employment law.

The government is giving businesses a lot of support at the moment, but it is keen to remind owners and directors that all the usual laws still apply:

  • Redundancy rules and protection for workers
  • Equality and discrimination laws
  • Taxes due on grants (even if they are deferred)
  • Strict rules on staff not working while furloughed

If in doubt, we would recommend you consult an employment lawyer, tax expert or an accountant who is experienced working with small businesses.
At the moment the rules around furlough and its alternatives are changing daily. We'll have more information as soon as it becomes available. Be sure to check our blog for updates.

If you'd like to discuss your options during the coronavirus crisis, please get in touch. We are staying on top of all the announcements from the government and can help you navigate this challenging time.

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