UK COVID-19 Public Inquiry review of furlough too important to ignore? 

July, 2022 - Shoosmiths LLP

Shock to UK employment world

The UK employment model was turned on its head by COVID-19 and the restrictions brought in by the Government.

The seismic effects of the restrictions and the speed with which they were introduced tested the adaptability and resilience of employers and employees in a way not seen previously in the UK. In March 2020, with minor exceptions, the hospitality, retail, sport and leisure sectors (including cultural institutions) were temporarily closed and then reopened by degree. This process was then repeated at the start of 2021 as the country entered another lengthy lockdown.

Response of UK Government to COVID-19

The UK Government launched several schemes that were designed to help employers and employees weather the economic storm created by the imposition of the COVID-19 restrictions. The Coronavirus Job Retention Scheme (CJRS) was the centre-piece of the UK Government’s response to the effect of the COVID-19 restrictions. Under the CJRS, UK employers could place employees who they would otherwise have had to make redundant, on furlough, and claim up to 80% of the wages, subject to a cap of £2,500 per month of those employees from the UK Government. The CJRS was open to many UK employers and covered most employees, with it left to the discretion of employers as to whether they would offer to pay all, part or none of the 20% balance of an employee’s wages. The terms of the CJRS had to be met by employers, including obtaining an employee’s consent to the new furlough arrangement unless employers had a pre-existing contractual right to furlough employees (and even if such right existed, many employers would have had to collectively consult given the large number of employees it wanted to place on furlough).

Cost of UK Government response to COVID-19

11.7 million employees (circa 26% of the work-force) were furloughed under the CJRS at a cost of approximately £70 billion whilst the estimated cost of all of the UK job support programmes introduced due to COVID-19 is a staggering £370 billion (approximately 13% of UK annual GDP). Despite the CJRS, the number of redundancies made by UK employers was the highest recorded since national statistics have been collected and many businesses unfortunately had to close – 2020 saw the number of UK private sector businesses fall by 389,600.

Issues COVID-19 Public Inquiry to consider in employment context

The following terms of reference for the COVID-19 Public Inquiry have been approved:

  • Employment related scope of Public Inquiry
  • The economic response to the pandemic and its impact, including government interventions by way of:
    • support for businesses and jobs, including the Coronavirus Job Retention Scheme, the Self-Employment Income Support Scheme, loans schemes, business rates relief and grants; … and
    • benefits and sick pay, and support for vulnerable people.
  • The closure and reopening of the hospitality, retail, sport and leisure sectors, and cultural activities.

Expected areas of Public Inquiry’s employment investigation

  • The terms of the CJRS scheme; implementation of the scheme - were employees able to freely consent to furlough proposals; obligation to repay furlough claims in certain circumstances?; the jobs and businesses saved by it with a focus on employers who claimed furlough monies and then made employees redundant; abuse of the scheme - including fraudulent claims and breaches (employers who furloughed employees but pressured them into carrying out work – an estimated 6 million employees fall into this category) - HMRC will continue to seek to recover fraudulently claimed sums; and a cost/benefit analysis of the scheme including whether equity stakes should have been included as conditions.
  • Employee welfare issues ranging from claims of bullying during the pandemic - forcing employees to (return to) work whilst furloughed; attend work during lockdown; work in unsafe conditions with no anti COVID-19 procedures; working hours and mental health/isolation concerns during lockdown.
  • No jab, no job policies and fairness of resulting dismissals; vaccination as a condition of entry to workplaces; the cost of health and safety compliance for employers when employees returned to their normal place of work.
  • Discrimination claims including those arising from employees who want to work from home permanently - pay and career development implications.

Benefit of providing evidence to the Public Inquiry

The employment tribunal has already received multiple unfair dismissal claims relating to no jab, no job policies and many employees have issued whistle-blowing, bullying and constructive unfair dismissal claims that rely heavily on their employer’s alleged abuse of the furlough scheme and conduct during the past 2 years. Independent reviews of furlough claims as part of transactional due diligence have revealed significant errors made by companies of all sizes mainly made in good faith due to not having fully understood the terms of the scheme. HMRC estimates that £5.5 billion of furlough payments in 2020 were fraudulent, whilst only £28 million of furlough claims were blocked due to concerns meaning that the scope of abuse of the scheme (due to both good faith errors and fraud) remains enormous and hard to quantify.

Employers experienced significant difficulty in understanding the evolving terms of the CJRS and taking business management decisions frequently with the spectre of explaining their decisions in an employment tribunal 12-18 months later. The findings of the COVID-19 Public Inquiry and response plans to any future pandemics will be enhanced significantly by receiving detailed and frank feedback from employers on the challenges they faced and suggestions for simplifying or removing such issues in the future. Employers in the same sector can choose to co-ordinate their feedback to the Public Inquiry to save cost, demonstrate the challenges were experienced across the board and ensure collective recommendations are given appropriate consideration.

Given the cost of the CJRS, which the UK will be paying off for years to come, and the number of businesses and jobs that were on the line due to the COVID-19 restrictions, employers should take the opportunity to make their views known to the Public Inquiry.


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