Furloughing: the Manager’s Guide to Implementing the Coronavirus Job Retention Scheme

Furloughing. It’s not a word many knew until this week and is now in regular use by managers and leaders across the UK. (By the way, the OED definition is: “noun. Leave of absence, especially that granted to a member of the services or a missionary.”)

Introduced under the government’s new Coronavirus Job Retention Scheme (CJRS), furloughing is described by Nigel Morris, tax director at MHA MacIntyre Hudson, as: “an incentive for companies to keep employees on payroll. To access the support companies need to classify employees as a furloughed worker, which means they should not undertake any work for the company while furloughed, including answering calls or emails. In exchange, employers can claim a grant of up to 80% of each employee’s wage for all employment costs, up to a cap of £2,500 per month.”

This past week we’ve spoken to managers who’ve moved employees onto the scheme. They say that while the scheme’s details are sketchy, it’s reasonably straightforward to implement. As we discuss later, one key issue is to get the affected employee’s consent. The good news we’re hearing is that affected employees, in most cases, have appreciated the opportunity to remain in their job and receive an income. There also appear to be some ongoing questions about what is included within the £2,500pm upper ceiling, but these will doubtless be clarified in the days to come.

Another key provision of the furloughing arrangement is that the affected employees should not work in any way during the furlough period. There is already some lobbying that part-time work should be allowed during this period but the government is clearly keen to make sure that the scheme is straightforward and not open to abuse.

Because there are so many ongoing questions, we spoke to three experts to understand the finer details and the important management considerations: Andrew Lightburn, senior associate, employment at DWF Belfast, and Jo Davis, employment partner at BP Collins. Please note, what follows are not the views of nor do they represent advice from CMI. If in any doubt, legal advice should be sought before taking action.

While we don’t know the full list of terms and conditions that come alongside implementing the Job Retention Scheme, the government is updating information regularly. Here’s what we know so far, plotted against the skills you’ll need to consider the information and how it relates to your business.

Strong Decision-making

It goes without saying that this is a tough call for you to make. First things first, get as much information about the CJRS scheme as possible, then get all senior leaders together (virtually) and discuss the current standing of the company. You need to have all the latest management information and financial forecasts available in order to make this tough call. You’ll need to look of course at whether you can sustain current expenditure and where costs can be saved and cash-flow improved. Senior leadership should be in full agreement about the strategy you’re taking.

To help with this process, we’d point you towards the risk assessment checklists that are available on CMI’s ManagementDirect. These will help you rank risks high to low; give you the five appropriate responses for mitigating risk – transfer, eliminate/prevent, mitigate, contingency, and acceptance; give you insights on scenario planning as well as workflow steps for risk management processes. You can find insight on steps to effective decision-making on CMI’s Knowledge Bank.

These skills will be important as you make these crunch decisions about employee furloughing. As Jo Davis, employment partner at BP Collins, says: “All UK employers, regardless of size or sector, can claim a grant from HMRC for the Coronavirus Job Retention Scheme, and the scheme applies to all employees on PAYE, including those on zero-hours contracts.”

“While some businesses are contemplating a total closedown, others are considering closing just a particular section of their business, and others are simply looking ahead and are contemplating cutting costs in the face of an inevitable downturn. Those who need to reduce costs fast are generally well advised to furlough all or a proportion of their staff rather than place them on reduced pay, as the latter can’t be reclaimed from HMRC.”

Over-communication

“While there is no requirement to communicate with other staff at this time, it is generally good practice to keep staff up to date with developments in the business, especially in difficult times such as we are now experiencing,” says Jo Davis at BP Collins. “This is particularly true where employees’ roles may be affected by the furlough of their colleagues.”

Employees will be looking for clear and effective communication about the future of the company. If appropriate, managers should look to allay any fears, explain the current business strategy in response to the crisis, and invite questions and concerns from employees and team members. As CMI’s chief executive Ann Francke said at the outset of this crisis: “When in doubt, over-communicate.”

On CMI’s ManagementDirect there’s a huge amount of insight about effective communication. Not everyone finds this task easy. Our checklist 268 Communicating in a Crisis takes you through key steps of communicating company-wide. It includes considerations such as appointing a key spokesperson, drawing up a communications plan that covers the scope of the disruption caused by the crisis, how the business will (or may) be affected, specific roles the disruption will affect, and how long the crisis will last. It’s important to then follow it up with regular meetings so you can talk about new developments, new decisions, and any action plans or responsibilities the crisis team or employees have from that point on.

For more ways we can advise and guide you through the COVID-19 outbreak and all its impacts on your everyday working life, visit our Leading Through Uncertainty hub.