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What might the end of furlough look like – and how should HR prepare?

7 May 2020 By Maggie Baska

People Management asks employment experts about the feasibility of different options being considered by government for winding down its job retention scheme

The government’s coronavirus job retention scheme is expected to formally wind down from July as lockdown measures are eased. 

With prime minister Boris Johnson set to reveal plans to gradually lift lockdown this Sunday (10 May), chancellor Rishi Sunak is reportedly preparing to outline plans to officially end the scheme next week – to allow time for the fact that employers with more than 100 staff must run a 45-day consultation before making any redundancies. 

In an interview with ITV this week, Sunak revealed there would be no “cliff edge” at the end of the furlough scheme, with the Treasury understood to be examining several options for gradually tapering the government’s offering from July.

So what is the end of the scheme likely to look like, and which options do HR and employment experts believe will be most helpful and feasible for employers?

Reducing the current wage subsidy gradually

The government is reportedly considering reducing the current wage subsidy paid by the state – which currently sits at 80 per cent of the individual’s salary – to 60 per cent, and lowering the £2,500 cap on monthly payments. This comes as HMRC said the total value of claims to the public amounted to £8bn on 3 May. 

Anita Kalra, managing director and head solicitor at Kalra Legal Group, said this was a sensible and likely solution, and businesses should plan for how and when to bring back furloughed workers with this in mind. 

"There are many businesses that have furloughed a majority or all of their staff, and this lifting of the subsidy would allow for people to plan a phased return to work where they see portions of the workforce coming off furlough as lockdown restrictions are lifted," Kalra said.

But Hannah Disselbeck, employment lawyer for Fieldfisher, told People Management this model would not necessarily work, as it assumed businesses would be able to afford to "top up" the government's wage subsidy for those staff who were last to come off furlough. Disselbeck said she had not come across many employers who would be able to cover this cost in the current climate. 

"This option doesn't make a huge amount of sense to me because either people are ready to bring employees back to work or they're not," Disselbeck said. "If they're not, all this is doing is either increasing the cost for the employer or penalising the people who are furloughed."

She added that while such a reduction in subsidy might be imperative for the government to reduce the eventual cost to the public, it was "unrealistic to expect it to hit anybody other than the furloughed employees". 

Allowing flexibility in the scheme

Another option is to again reduce the state subsidy, but while allowing furloughed staff to work some hours. The CIPD said the current “all or nothing” format of the scheme must be reviewed to wean businesses off the scheme gradually and help ease furloughed staff back into the workplace.

The CIPD also said the scheme should be extended to at least September this year and modified to enable furloughed staff to come back to work gradually as lockdown measures were eased.

“However the government chooses to move forward, any reform of the scheme will need to give employees the option to work reduced hours to be of most benefit to employers,” said Ben Willmott, the CIPD’s head of public policy. “This is good for the employee as it could help to protect their role moving forward, and it will help businesses to respond as economic demand gradually picks up, while reducing pressure on the public purse.”

Kalra agreed this would be beneficial to employers as they could set up a rota system where furloughed staff were brought back in when needed, allowing for fluctuations in work.   

"Currently, you have to be on furlough for three weeks so I think it would be very beneficial if this was more flexible to allow for someone to be furloughed for two weeks," Kalra said. "It would give the employer flexibility because some staff might not have enough work for the entire month, such as payroll, and you could bring them back for that one- or two-week period where they will have a peak in work."

But Willmott said it would make more sense for furloughed staff to come back on a part-time basis, working one or two days a week and with their wages topped up with a smaller government subsidy. This would mean less administrative strain on HR, who would otherwise have to plan which sections of the workforce to bring back when, he said.

“It would mean HR could plan for individuals to return to work one or two days a week over the next one to two months, and then maybe increase that to two to three days a week as the business demand increases,” Willmott said. 

Tapering the scheme on a sector-by-sector basis

Like the CIPD, the British Chambers of Commerce (BCC) has said that any reduction to the furlough scheme would need to be gradual, given how critical it has been in allowing people to keep their jobs. Dr Adam Marshall, director general of the BCC, said the government’s approach to ending furlough should reflect the phased lifting of lockdown restrictions. He said this should involve tapering the scheme on a sector-by-sector basis as some industries had been more severely affected than others. 

“Support must remain in place for firms not able to operate for an extended period and for those who face reduced capacity or demand for their services as a result of ongoing restrictions,” Marshall said. 

Disselbeck said there was a "balance to be struck" given the value of the furlough scheme in avoiding redundancies in those sectors most directly affected by lockdown measures, such hospitality and retail.

"There is real value in this approach because those are jobs that aren't being affected by the wider economic picture but really directly by the lockdown restrictions," Disselbeck said. "Those are jobs that you could imagine would come back once we ease the lockdown, and I think it would be very foolish to plan an exit from furlough without focusing on those groups."

She added, however, that the furlough scheme could still prove a "temporary crutch" for some operating in those sectors hardest hit by the crisis, and said redundancies were "inevitable" because of the serious economic downturn forecast for this year. 

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