People Puzzles CEO and Founder talks about Furloughs and how to use them best to prepare your business for future growth.
The word Furlough has been on everyone’s lips for the last week, and many businesses have already put a number (or all) of their staff on furlough to take advantage of the government’s Job Retention scheme. The payment of 80% of basic salary cost, plus employers NI and statutory pension provision is a very welcome support in this difficult time, albeit with the lag of payment which will impact cashflow.
The government has provided guidance on the scheme, but it leaves many questions unanswered for CEOs who want to put it to best use.
At People Puzzles, we have been through the difficult journey of furloughing a number of our brilliant staff members over the past week, with a view to keeping the business in really great shape for the recovery. It has been emotional, and those of us staying are likely to be working harder and longer.
One of the biggest challenges about Furlough is that you can’t share it between two members of a team, you have to lay off workers completely, and whilst they are furloughed (for a minimum of 3 weeks at a time) they cannot do any work for the company at all.
Here are some tips to help you negotiate furloughs:
Deciding who to furlough and who not to furlough
The Company will decide who is furloughed. This can be a tricky decision, and some work may need to be reorganised, and perhaps new skills transferred in the time before furlough starts. If you are home working, this may have to happen remotely.
It can be helpful to start with a list of the absolute essentials of what needs to be done during the next tricky period to decide who to furlough and who to keep. Keeping your ongoing clients happy is of prime importance. Salary budgets also need to be kept in mind: the higher paid staff are going to feel the £2,500 cap more, but they cost more to keep on as workers.
If times get tougher before they get better, you may need a second wave of furloughed workers. It is perfectly OK to ask for volunteers for furlough, as there may be some workers who would prefer this option due to additional childcare or other caring responsibilities at this time. Remember there is no employee right to be furloughed, it is up to you to decide what suits the business best.
Designate affected employees as ‘furloughed workers’
Furloughing is subject to existing employment law. Best practice is to follow the example of a simple redundancy process in order to furlough workers by notifying them of the impending change, offering a period of consultation (we suggest at least 48h), then giving final confirmation in writing. As this is a contractual change, you do need your team to sign agreement, ideally electronically at the moment.
They are not able to work for the business during this time, but continue to have employment rights, continuity of service and are entitled to various benefits including accruing holiday pay.
If you have a number of people doing the same job and you only need half the number going forward, you will need to use objective selection criteria to decide who are the best people to remain and the others would be at risk of furlough. Again, voluntary furlough could make sense here, and do manage your conversations with tact and ensure that you are not making assumptions about what employees can and can’t do without proper consultation.
You could also potentially share the furlough leave between workers, as there is a 3 week minimum furlough period, but after that time there is no current government advice to suggest you can’t bring those workers back to work, and furlough a different team for the next 3 weeks.
Always keep clear notes about what you have done and why
Keeping employment law is always about good records, so make sure you store emails, signed agreement to furlough, fair selection criteria and dates. The HMRC portal details are not yet clear, but should be available soon.
What about redundancy or short-time lay off clauses?
The furlough scheme is open to employees who were on payroll by 28th February 2020 but are no longer working. It is safest to put everyone not working onto furlough rather than use any other schemes. This protects you from any claims of unfair treatment.
Some other furlough issues to consider
You can choose to increase furlough salary payments up to 100% from the government contribution. You will need to think carefully if you can do this, for cashflow purposes and also for employee engagement, in particular for those that are continuing to work (and potentially putting their health at risk) knowing their colleagues are at home not working and receiving 100% of salary.
Anyone on the National Minimum Wage will start receiving less than the NMW during this period if you aren’t making salaries up to 100%. This does not break the NMW rules as they are not working.
If your business finances are under pressure, you may also want to introduce salary reductions for employees who are continuing to work. You have to bear in mind the 80% furlough workers again here, so it may be that you introduce a reduced salary for also reduced hours, or there is another carrot to keep your workers onside. This is when culture and values really show through! I was really blown away when some of our furloughed workers said they just wish they could continue to work to help the business through such a tricky period.
Coming out the other side
At the moment we don’t know how long the coronavirus is going to keep us in isolation. There are loads of articles being written about how business is never going to be the same, and at the moment it is really hard to tell. It is certainly likely that there will be a shift in attitudes to things like home working, size of office space and flexibility.
With that in mind, it is worth doing some scenario planning about the future. You may wish to ask yourself questions like:
Will the business look exactly the same when it fully reopens?
Does our organisational structure work efficiently? Would it benefit from some restructuring? Does our hierarchy make sense?
Do I have the right people in the right teams? Are the team the motivated and enthusiastic group I want to rebuild the business with?
How are we going to get the business up and running again really quickly when the period of isolation comes to a close? What order should people come back to work if I need a phased return?
As a business owner
Finally, as a business owner, it is such a strange time to be living through. The one thing we do know is that coronavirus is completely outside our control as individuals: we are in charge of our little ship and steering it as best we can. I’d encourage you to keep communicating with your teams, ideally little video messages you can send out to everyone. We are all in this together, and hopefully we will all come through it together post-furlough, and back into a recovering and then thriving business and economy.