01 July, 2020
As the COVID-19 pandemic continues to sweep across the country and beyond, businesses in the manufacturing sector have faced significant operational challenges.
Whilst some businesses have closed down operations completely in response to falling demand and/or government guidance, others operating within the sector have had to react to a significant increase in demand for essential supplies such as PPE, Covid-19 testing kits, and not forgetting, at the outset of lockdown, toilet roll.
In the news we have seen many manufacturers change their productions to meet the demand for products identified as being vital in helping the fight against coronavirus. We have also received a record number of queries from clients within the manufacturing sector seeking advice on adopting safe working practices and implementing new policies and procedures.
What has become clear is that the manufacturing sector in particular, has been forced to continually adapt to the changing climate. With the lockdown restrictions seemingly heading towards a gradual lift and with that, hope that the economy will begin to take steps towards returning to normal working life, we are advising businesses to start preparing for a return to work, none more so than by utilising the flexible furlough scheme, which comes into play from 1 July 2020.
Whilst the concept of flexible furlough seems relatively straightforward, the workings of the scheme in practice may be quite complex, particularly for businesses in the manufacturing sector who heavily rely on differing shift patterns and variable hours of work. Below is some guidance on what you ought to consider before implementing flexible furlough:
The starting point for determining which employees to offer flexible furlough to should be to consider the needs of the business. Think about which areas of the business are in demand and which roles are critical to the business functioning? Care must be taken to avoid direct or indirect discrimination in the selection process, and if you must select between staff doing identical roles, you may wish to consider either asking for volunteers, having a selection matrix or using a method of randomised selection. You may also wish to consider the individual circumstances of employees including whether they are high-risk, shielding, or have caring responsibilities.
You will need to agree with employees (either directly or via a trade union collective agreement with a trade union) the hours and shift patterns on which they will return to work. This arrangement needs to be set out in a new written agreement and from 1 July 2020 you will need to keep a record of the hours worked and not worked. As a business you will need to give clear thought to how you might use the flexible furlough scheme and ensure that the written furlough agreement reflects this. Many businesses within the manufacturing sector may have little idea now, at what rate productivity will return. You will therefore need to ensure that there is a balance between having sufficient certainty in the agreement on what it is you're actually asking the employee to do whilst allowing the business flexibility to vary those terms.
Whilst the flexible furlough scheme has brought a significant amount of flexibility (in comparison to the original scheme), it has introduced a limit on the number of employees who can be flexibly furloughed in a claim period, subject to very limited exceptions. In this regard the number of employees claimed for in a single period starting from 1 July 2020 cannot exceed the maximum number of employees the employer claimed for under the initial scheme. For businesses who have already been rotating staff on and off furlough, this will mean that not everybody will be able to return on flexible furlough at the same time.
Prior to being able to calculate any payments you will first need to work out the employees' usual hours of work and their furloughed hours. This is where the operation of the scheme risks becoming particularly complex, as whilst it should be relatively straightforward calculating usual hours for employees who work fixed hours, it is not so straightforward calculating usual hours for employees with variable hours (as is common in the manufacturing industry).
The final thing to note is that employers who utilise the flexible furlough scheme will be required to pay employees in full for the hours that they work. This will not be recoverable under the scheme and employers will only be able to claim for the hours not worked, which ordinarily would have been worked (had it not been for Covid-19). The monthly cap on furlough pay will also be proportional to the hours not worked. With the level of Government grant set to reduce from 1 August 2020, any businesses looking to utilise the scheme should firstly do the maths before implementing flexible furlough.
For some businesses there is a reluctance to bring staff back to work whilst levels of demand are low and the future is uncertain. The flexible furlough scheme however is intended to assist employers in getting their business back on track and gearing towards taking over the full cost of paying staff when the scheme closes at the end of October. Our advice to businesses is that the scheme ought to be utilised. Those businesses who decide to keep employees on full time furlough may find it difficult to re-establish business and produce the necessary profits to pay employees when the scheme closes.
For more information contact Abigail Lynch in our Manufacturing & Engineering department via email or phone on 0330 207 4469. Alternatively send any question through to Forbes Solicitors via our online Contact Form.