Published 7th September 2020
As the government’s furlough scheme end date is closing in, we thought it would be a perfect time to reflect on its contribution during the pandemic. Has it contributed to helping people get through lockdown? Or has it just prolonged the inevitable at a high cost to the taxpayer?
The furlough scheme was set up as a response to the coronavirus pandemic which led the UK into lockdown. However, the scheme is set to come to an end on the 1 October 2020 with employers contributing to furlough from 1 August 2020.
Let’s look back…
We remember when the pandemic began, and before the Coronavirus Job Retention Scheme began. In the course of that week, before we knew what the solution looked like, we saw lots of enquiries straight away about redundancies, restructures, and layoffs. It was a very difficult and uncertain time for so many employers.
When those employers asked what support was coming from the Government, we weren’t sure. Our thoughts that the Government would maybe offer an equivalent sum to statutory sick pay, to allow employees to still have some income whilst they weren’t required in the workplace. If we’re honest, we never expected a scheme as generous as the furlough scheme was. We, and our clients, all were surprised as the nature of the scheme became clear and the extensive support available became clear.
Has the Scheme helped?
Overall, we take the view that the furlough scheme has had a positive impact on workers and businesses during the coronavirus pandemic; without the support from the scheme, many people who have been or were put on furlough during lockdown would have simply lost their jobs almost immediately. This would have had enormous repercussions to people’s livelihoods, the economy, the nation’s mental health and so many businesses as they started to reopen without their team in place.
1 in 8 workers are still on furlough which shows that despite the increase in contributions, which employers now have to make from 1 August, people are still being supported by their employers.
This comes as figures show two-thirds of 67% of furloughed staff were receiving top-up payments to their wages from their employers as well as the 80% contribution from the government whilst being furloughed. Employers not only took advantage of the scheme to support their workforce but also went over and above to support those employees in their time of need.
Delaying the inevitable?
There is an argument that, perhaps, the furlough period just delayed the inevitable, which is, of course, possible for many. Redundancies are becoming increasingly common and The Citizens Advice in Scotland reported a 191% increase in requests for redundancy advice since lockdown. People have been paid for four to five months, only to lose their jobs anyway.
However, let’s think about the particular industries which were completely shut down by the pandemic; hospitality, some retail, tourism; all of these industries can and will hopefully recover, and therefore were able to bring those employees back to help them restart.
And, ultimately, there have still been wages paid until now that without the scheme would not have been paid before, at a time when those employees wouldn’t have been able to find other work if they had been made redundant.
As an incentive for employers to retain furloughed staff once the scheme has ended the government have introduced the furlough bonus scheme which may entice employers to retain staff who would have otherwise been made redundant. However, it remains to be seen if this scheme will work in practice as although it is a great incentive for employers, many businesses have expressed their concern with finding the money to keep staff employed until they receive the payment for the bonus.
We have created a blog which explains the furlough bonus scheme to answer any questions you may have; you can find this blog here.
Not all bad news
According to Forbes, the following industries have done well during the pandemic;
- Online retail – companies such as Amazon have had an increase in sales during the pandemic as people preferred to shop online.
- Workspace Solutions – this includes companies such as Zoom who have had an increase in business due to the lockdown
- Supermarkets – during lockdown supermarkets thrived as they were an essential business which was allowed to stay open during the lockdown
- Entertainment companies – Businesses such as Netflix saw growth during the lockdown as more people had to stay home and Tv.
Whilst people now are facing redundancies despite the scheme being in place, job adverts have only fallen by 4% which shows that people are still hiring so there are opportunities out there for people who are now seeking new employment and for anyone who may seek it when the scheme ends in October.
So, in our view, the furlough scheme saved employers in their time of need and allowed certain industries to continue to exist and not collapse during the pandemic. It’s helped employees who would have been left with no salary and no income in many cases.
Hopefully, those employers and employees can now go on to thrive.
By Alicia Collinson and Jodie Hill