Employers have two days until planned changes to the job retention scheme come into force that will see them start contributing to furloughed employees’ wages.
Despite hopes from businesses that the government would delay plans to start rolling back furlough, in line with the postponement of the final lifting of restrictions in England currently pencilled in for 19 July, the changes to the job retention scheme are still coming into effect later this week.
From Thursday (1 July), the government will drop its financial contributions from providing 80 per cent of employees’ wages for the time they are not working to 70 per cent. Employers will have to contribute that 10 per cent, as well as the National Insurance and pension contributions they are already paying.
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The government’s contribution is currently set to decrease again to 60 per cent in August and September, with employers due to pay 20 per cent of wages for hours not worked, before the scheme ends on 30 September.
As businesses start to plan for the next few months, John Boys, labour market economist at the CIPD, said HR professionals “should concentrate on welcoming back furloughed workers and taking a holistic approach to health, safety and wellbeing”.
Boys said that the 70/10 per cent split over wage payments for furloughed workers “looks positively generous” when compared to previous versions of the scheme, and added that it often made good business sense to avoid redundancies where possible. The average cost of a redundancy was £11,125, with recruitment costs running to on average £2,000 per employee, he said.
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But, Boys acknowledged that up to now, the furlough scheme had enabled firms to retain jobs “risk free”. “As they are asked to share the costs, they will inevitably shed some of the jobs that are unviable,” he said.
Keely Rushmore, employment partner at Keystone Law, was more pessimistic about the burden that the new salary contribution requirement could be on employers “treading water”, particularly those that are unable to fully reopen until the final restrictions drop, which is not expected to happen until 19 July at the earliest.
“Being unable to open or at least operate fully for an additional four weeks but needing to pay furloughed staff 10 per cent of wages during that time could mean the difference between a business surviving or going under”, she said.
It was crucial businesses acted quickly and assessed what financial assistance was open to them, and what steps can be taken until they re-open, Rushmore said, suggesting HR professionals may need to consider whether they needed to cut staff costs through options such as pay cuts, amended working hours and redundancies.
But, she warned, businesses that rely on human capital – such as the hospitality sector – needed to think carefully before making decisions that may affect their commercial success when fully re-opening.
“Reductions in workforce and adverse changes in terms and conditions could have serious consequences – either because the business will not have enough staff to meet customer demand, or because they have a workforce that is too demoralised to work to its full potential”, she said.
Looking past Thursday’s changes to 30 September, when furlough support is expected to end altogether, Julie Grabham, director of JG HR Solutions, said firms needed to start considering other ways to restructure jobs.
Introducing job shares, increasing working hours and reducing the use of furlough and using holiday entitlement can all help ease pressure on the business, she said. And if redundancies needed to be made, Grabham emphasised the process remained the same as pre pandemic, with consultations and a fair selection process required.
“Employers are entitled to contractual notice period [...] and this must be considered while planning redundancies and workforce planning,” she said, adding that, unlike previous versions of the scheme, employers can no longer claim furlough payments for notice periods.
And Alan Price, CEO of Bright HR, added that any companies considering introducing short-time work needed to agree this with their employees, otherwise they risked breaching staff contracts.
“Employees cannot be forced to reduce their hours, but communicating with them about its necessity, if the company is under financial strain, may persuade them into forming an agreement.”