Advice

How should HR react to the furlough extension?

6 Nov 2020 By Jonathan Owen

With the government’s surprise announcement causing confusion among people professionals, People Management asked the experts how organisations can reframe their workforce strategies

Even by political standards, the decision yesterday to extend the furlough scheme until March 2021 came as a surprise to many businesses. Although undeniably welcome to employers struggling to survive the economic impacts of Covid-19, it presents a big challenge for HR teams that have spent weeks preparing for the introduction of the job support scheme and the job retention bonus.

With the details of the twice-extended scheme not expected until Tuesday (10 November) employers now face uncertainty over what may lie ahead. “Employers have been left confused by the government’s plans to protect jobs over the last few weeks, with many redundancies triggered over the uncertainty around the end of the furlough scheme,” CIPD chief executive Peter Cheese said yesterday.

With so much being invested in the furlough scheme to try to save jobs, People Management spoke to employment experts to find out how businesses could move forward following this latest development.

How much extra confusion will yesterday’s extension create for businesses?

For the majority, the decision to extend the scheme has simply come too late, says Paul Kelly, head of employment at Blacks Solicitors. “Given that the government was adamant that the furlough scheme would not be extended past October, employers made arrangements to make staff redundant before it expired, so there are relatively few employees who will continue on furlough in the grand scheme of things.”

He adds there is confusion among employers as to whether staff previously laid off should be rehired simply to be placed on furlough until March 2021: “The prospect of such increased administration makes the likelihood of this option being adopted voluntarily very low indeed.”

From a practical point of view, employers are also struggling to stay on top of the changes, notes Lauren Harkin, partner at Royds Withy King. “Most businesses cannot keep up with the rate of change and u-turns from the government, making their ability to plan and trade on a viable basis particularly difficult.”

Paul Holcroft, managing director of Croner, adds that the uncertainty and changing advice from the government over the last few weeks has had a real impact on employers, and “may begin to erode the confidence in any new announcement”.

But while employers are “pretty fed up” with last minute changes, says Kathleen Heycock, partner at Farrer & Co, the extension is still an increase in money that could potentially avoid redundancies. “I think that overall it will be welcome,” she says.

How will businesses have to change their workforce strategy to benefit from the additional support?  

Now is the time for crucial business planning, says Kirsty Rogers, employment partner at DWF, including a workforce audit to determine who needs to be furloughed. “Employers that have factored the job retention bonus into their budgets will need to urgently review this as the bonus will no longer be made in February 2021, and while there is an indication that there may be a bonus at a later stage, it will not come in February,” she adds.

There are also longer-term consequences of having staff furloughed for prolonged periods, points out Rhian Radia, partner at Bishop & Sewell. “Some employees could now be spending a year on furlough, which does raise concerns about de-skilling and losing touch with their workplace and colleagues,” she said.

And Sheila Attwood, managing editor of XpertHR, echoed this: “In the longer term, businesses may need to significantly re-think their business models and employment strategies for the future.”

However, Kelly suggests that employers, having spent the last few months planning cuts to their staff, were now unlikely to make changes to their plans “given that uncertainty reigns as to how long the new lockdown will last or if the furlough scheme will continue past March”. 

Gary Cookson, director, Epic HR, also says the extra financial support could allow firms to adopt more of a “‘wait and see’ approach” on their future workforce plans.

Will employers be asked to contribute more towards furlough from January?

In a nutshell, says Nicola Inge, employment and skills director at Business in the Community, it’s too early to tell. “We’re yet to know the true economic impact of this new lockdown or what it will mean for the Christmas period,” she says.

The likelihood of employers being asked to contribute will depend on the length of the lockdown, according to Rogers. “If the lockdown ends on 2 December and businesses are able to improve prosperity over the Christmas period, employer contributions may be implemented in January.

“However if the virus continues to spread and the lockdown is extended, employer contributions may be delayed beyond January 2021.”

But it is unlikely that the government will be able to justify asking firms to start paying towards the salaries of furloughed staff anytime soon, says James Tamm, director of legal services at Ellis Whittam. “The fact this is continuing to March next year suggests the government is expecting a huge amount of disruption in the next few months. If you throw in the potential for a no-deal Brexit then things could even be worse in January.”

Will HMRC's publication of employers’ claims from December onwards help prevent furlough fraud?

This should have been done before now, says Radia. “Many employees have spoken out about being required to work during furlough leave. More could have been done to ensure that employees knew that their employer was taking part in the furlough scheme, and publishing details of employers that are claiming under the furlough scheme now is late in the day.”

But Harkin argues simply publishing details of employers using the scheme “won’t go far enough”. “A spot check system for businesses would be more effective,” he says.  

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