CIPD calls for further extension of furlough scheme

Open letter urges government to maintain support until June and delay introducing employer contributions or risk more ‘significant’ redundancies

The government should not introduce employer contributions when the furlough scheme is reviewed at the end of January, the CIPD has said, or risk causing disruption to businesses.

The body has also called for a further extension of the scheme beyond its planned end date of 31 March 2021, and said support should be gradually phased out to give employers more certainty while vaccinations are being rolled out.

In a letter to chancellor Rishi Sunak, CIPD chief executive Peter Cheese said government contributions to the job retention scheme should remain at 80 per cent throughout February and March, only dropping to 70 per cent in April and then 60 per cent in May and June.

“We have been consulting with HR leaders, particularly from those in sectors hardest hit by Covid-19, [and] the message that has come back strongly is that an extension beyond March will be needed to help prevent further significant redundancies given the uncertainty around both the pandemic’s trajectory and the timing and speed of any economic recovery,” Cheese said in the letter.

“We believe that a gradual phasing out of the [job retention scheme] from April to the end of June would provide sufficient support for job protection, with the extension buying time for the vaccination programme to take fuller effect.” 

Earlier this year it was announced that the furlough scheme would be extended from its initial end date of 31 October 2020 until the end of March.

Under the current iteration of the scheme, the government pays 80 per cent of furloughed workers’ wages for hours not worked, capped at £2,500 per month, while employers are only expected to pay pension and national insurance contributions. Employers pay workers as normal for hours worked.

However, the government is scheduled to review the scheme towards the end of January, when a decision will be made on whether to start asking businesses to contribute to furloughed workers’ wages – similar to those asked of employers back in August.

While Cheese acknowledged concerns over the cost of extending furlough beyond March, he said the government must also take into consideration the cost of not providing support. “These include a significant increase in the number of people claiming universal credit, and reduced confidence and spending power in the economy at a time when both have never been more needed,” he said.

“Jobs that are lost over this period are likely to feed into long-term unemployment as recruitment and onboarding costs will mean cash-strapped employers will hesitate to hire permanent staff until they are certain about the strength of the economy.” 

The next phase of the job retention scheme also needed to be linked to support enabling businesses to train and reskill furloughed workers – including a fund to pay for the training of workers already made redundant by the pandemic – Cheese said in his letter.