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Is any sector safe from Covid-related redundancies?

20 Aug 2020 By Francis Churchill

As furlough winds down, job cuts are starting to bite. But just how far will they go and what are the alternatives?

Redundancies have been the bogeyman of the coronavirus crisis from the very beginning. The memory of the 2008 financial crisis – which saw some 1.3 million jobs lost over a period of two years – loomed ominously large from the start of lockdown when huge swathes of the economy were brought to a grinding halt. But so far with Covid-19, such large-scale job losses have mostly been avoided thanks to the government’s job retention scheme. The latest figures show around 9.6 million jobs have been furloughed so far at a cost of £34.7bn to the treasury.

But as the furlough scheme – as well as several other government support packages – is wound down, the spectre of redundancies is rearing its head again. According to a recent CIPD poll, 33 per cent of businesses are planning to make redundancies by the end of September – a 50 per cent rise on the previous quarter. Already, figures from the Office for National Statistics showed that in the three months to July there were 220,000 fewer people in jobs than the previous quarter, with experts warning there was more to come. “A real concern is that this is just the first wave of bad news for the jobs market,” says Gerwyn Davies, senior labour market adviser at the CIPD.

A number of well-known firms have already started to make substantial cuts; for example, big names in the aviation industry, which has been particularly hard hit by the crisis, including easyJet, Airbus, Rolls-Royce and British Airways. The high street has suffered too, with John Lewis, Debenhams and Boots all announcing redundancies. Pub chain JD Wetherspoon – which found itself in hot water at the start of the outbreak when its founder and chairman, Tim Martin, sent a video message to staff apparently encouraging them to look for jobs elsewhere – is also making cuts at its head office.

This is concerning for employers and staff alike. In a recent study by Perkbox, 58 per cent of employees said changes to the furlough scheme and future uncertainty over the world of work had negatively affected their mental health, leaving them with rising levels of stress and anxiety. “We know presenteeism rises when people are worried about job security,” says Rachel Suff, senior employment relations adviser at the CIPD. “Now, presenteeism isn’t just physically returning to work. It’s also about if you’re not feeling well [but continue to work remotely], and we know people have a lot of anxiety, depression and mental health issues during this pandemic.”

And the pain is unlikely to be felt evenly. As in any economic crisis, the youngest entering the jobs market and those closest to retirement appear to be most at risk financially. There is also mounting evidence that parents, carers and the disabled are being disproportionately affected; a report by Citizens Advice raised concerns that employers might seek to make at-risk groups and those returning from shielding redundant first to avoid more stringent safety measures. 

Employers considering redundancies should first explore alternatives, including freezing recruitment, reducing hours and cutting bonuses, says Davies. He also suggests keeping a tight rein on pay increases – as the last CIPD Labour Market Outlook suggests businesses are already doing. 

But many will be unable to avoid redundancies, which means employers must remember that the normal rules around restructuring still apply. “There are no employees who cannot be made redundant,” says Lucy McLynn, head of employment and partner at Bates Wells, but this doesn’t give employers carte blanche – if an employee is on maternity leave or shared paternity leave, for example, and their post is made redundant, they must be offered any alternative vacancy. 

And while furloughed workers can be made redundant, businesses shouldn’t prioritise them over other employees – doing so could create a risk of potential unfair dismissal claims, warns Andrew Crudge, employment and immigration associate at Trethowans. “If childcare responsibilities prompted the decision to furlough an employee, this could be seen as unfair when it comes to redundancy,” he says. 

“Instead, the company should put a plan together to consider what roles it will require going forward. If this is likely to result in dismissals, then all affected staff should be placed at risk of redundancy, and this shouldn’t just include furloughed staff.” Employers should also be aware that recent legislation now guarantees employees redundancy packages based on their regular pay and not their furlough rate.

The next few months could be bleak for businesses as the safety blanket of the furlough scheme is removed. But not all commentators are totally pessimistic – in August, a report from the Bank of England said that despite the winding down of the government’s support schemes, the majority of workers exiting the furlough scheme were likely to return to work. Even this report, however, acknowledged there will be “considerable uncertainty” ahead. 

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