SPECIAL REPORT FURLOUGH SCHEME
What do travel companies need to know about the latest changes to the furlough scheme? Travlaw’sAmi Naru offers guidance
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 ‘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 about ‘flexible furlough’ and furlough exit strategy.
Furlough changes When the Coronavirus Job Retention Scheme was introduced 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, Rishi Sunak, extended the scheme until the end of October, with guidance to follow. What was known at that stage was that 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.
Flexible furlough On May 29, the chancellor announced further key changes with a new flexible furlough scheme to start from July 1 (see box). Detailed guidance about the new flexi furlough is expected to be published on June 12. 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. Payroll departments will need plenty of time to work out the sums and external assistance may be required. 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 employees. 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. But even with the additional lifeline
of the flexible furlough scheme, for some employers this will not be enough and will merely delay the 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.
Employment options 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 retrain or upskill 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 as ways to fill the gap, until the travel industry picks up. During these difficult times, clear
communication from managers 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. OAmi Naru is partner and head of employment at Travlaw
FURLOUGH KEY DATES
June 10 The last date by which
employers can place employees on furlough for the first time.
June 30
The furlough scheme will close to 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 ‘Flexi-furlough’ to start.
Employees can 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 are on furlough.
August 1
Employers will pay cost of employers’ national insurance (NI) and auto enrolment pension contributions. The government will continue to pay 80% of wages for staff on furlough, up to £2,500.
September 1 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 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.
travelweekly.co.uk
11 JUNE 2020
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