Is Furlough the Redundancy Waiting Room?
The very nature of the Coronavirus Job Retention Scheme (CJRS) is to provide financial assistance to Employers and preserve the employment of millions of workers. Throughout the pandemic the Government has adapted and improved its rescue packages to meet demand and need.
Where are we now?
The CJRS or furlough scheme will come to an end in October. The current contribution of 80% of employee salaries (capped at £2,500) by the Government is due to change from August; from here employers will have to pay National Insurance and Pension contributions. Then, from September, employers will have to contribute 10% (rising to 20% in October) of employees’ salaries and the Government’s contribution will reduce to 70% (decreasing to 60% in October).
The impact of the pandemic has affected everyone and all industries. Employers are now planning and implementing new ways of working and safe working environments, whether it be social distancing, use of face masks, or implementing desk barriers.
The CJRS remains available for those with no work to do; however, with a gradual relaxing of lockdown measures and an encouragement to get back to work, it seems one major issue is the need for staff to return to normal working hours – the need is just not there. There may be a need for staff to work reduced hours but, currently, staff cannot do this and remain on the CJRS. In this respect, the CJRS has lacked flexibility.
However, the Chancellor has recently announced, from July, workers can return to part time working but employers will have to cover 100% of employee wages on the days/hours worked. For normal working days not worked, the employee can benefit from the furlough scheme. This may help many employers gradually bring staff off the scheme.
The ambition is that the slow withdrawal of the CJRS will be mirrored by the recovery of business demand, and in turn the economy. The Chancellor announced the scheme will not be extended again (even if there was a 2nd peak!); therefore, a lot is being placed on business demand recovering sufficiently by October to meet the cost of employee salaries, otherwise, employers and employees could face that ‘cliff edge’ after all.
It is probably widely accepted that measures must be put in place to reduce the burden on public finances, however, it is possible (without trying to be too pessimistic) that all the furlough scheme has done, to a large extent, is delay the inevitable redundancy process.
The recent drastic rise in the unemployment rate, despite the CJRS being available, provides a sign of what is to come. The crunch time will be from August to October, when we will see whether the Government’s exit strategy to return the UK to work has worked. The advice is Take Action!