End of Furlough, End of an Era

Louise McCosh


End of Furlough, End of an Era

The government-funded furlough scheme drew to a close on 30 September 2021, and marks the end of an era for both employers and employees.   In this article, we explore the impact of the Coronavirus Job Retention Scheme over the last year and a half, and what the end of the scheme will mean for employment.     

 

A world-renowned scheme

As with many aspects of the coronavirus pandemic, the UK government’s approach to dealing with employment has been unprecedented.  Before March 2020, furlough was not a term used in the UK employment landscape, rather it was an American concept which Chancellor Rishi Sunak adopted as a means of supporting employers in the midst of the crisis.  

Over the last 18 months, British workers have stayed at home, and in return, the government have funded wages.  There have of course been a few bumps along the way such as:

  • The astronomical cost of the scheme is estimated to be £66 billion which represents one-fifth of the government’s spending on the pandemic - a cost taxpayers will bear for many generations to come;    
  • The somewhat simplistic concept became a minefield of complex calculations leaving employers and payroll professionals, and at times the HMRC, scratching their heads;   
  • The many plans to scrap or amend the costly scheme resulting in several last-minute U-turns by the government;
  • The opportunity for furlough fraud from unscrupulous businesses which the HMRC are reserving 6 years to investigate; and
  • The need for employers to balance the potentially divisive nature of the scheme with furloughed staff viewed as having an ‘easy pandemic’ versus those still working and taking on additional workloads.

However, despite the numerous criticisms that can be made, the majority would consider the furlough scheme to be a success, so much so that political opposition are still calling for it to be extended.  Over the course of the pandemic, 11.6 million jobs were supported by the scheme, and this has undoubtedly stemmed the flow of significant volumes of job losses.  Had the scheme not been introduced when it was, the majority of employers would have been at a loss as to what to do to pay wages.  Furlough bought time for most, it enabled both employers and their staff to keep their heads above water until they were able to get back to work.  The UK furlough scheme was trailblazing with many other countries across the world following suit.  

 

A juxtaposition of job losses and labour shortages

More than a year and a half on, there were still one million people on furlough in September 2021 when the scheme ended.   We wait with baited breath as to whether this will spell mass redundancies for those workers, but it is widely viewed that this is unlikely. 

It is surmised that most employers utilising the scheme in the latter stages were potentially doing so to create extra headroom in what is likely to be a challenging winter ahead, and their furloughed staff will revert to their normal hours and conditions as the country opens up.  It would be naïve to consider the scheme as a magic bullet to all job losses - there will inevitably be some employers in certain sectors which have been unable to fully open up that may have no other option but to consider reducing their headcount.  Whilst redundancy is expected to be the exception rather than the norm, it is estimated that 1 in 20 people will lose their job as a result of furlough ending.  

However, in stark contrast to job losses, the UK is currently in a position where there is a significant shortage of labour in certain sectors such as haulage, care and hospitality.  This juxtaposition between potential job losses and labour shortages could mean that there is an opportunity to stem the gap of workers in certain industries with those exiting the furlough scheme.  This is of course not an overnight solution as there will be a skills mismatch given many of the available roles require qualifications and experience, but it could present a longer-term strategy to a significant labour shortage which has not been helped by Brexit. 

 

End of an Era

The end of furlough marks a step-change in the coronavirus pandemic – it is an acceptance that the unprecedented government funding cannot be in place forever, and that industry and life is starting to look brighter month on month.   Chancellor Rishi Sunak recently announced £500 million of funding will be made available to help with the transition out of furlough, but he has been clear in his intention that this will be used to support initiatives to get people into work rather than to subsidise wages as has been the case since March 2020. 

It goes without saying that business is not out of the woods just yet with winter around the corner – it is widely expected there will be spikes in coronavirus cases and that general flu and bugs will be higher than normal in the months ahead.  All of this will have an impact on employers whether that be managing sickness absence, dealing with localised restrictions or handling reduced levels of business – employers will need to be prepared with a new toolkit to respond to these challenges.

 

Further Support

If you need support and guidance in relation to navigating employment issues in the months ahead, French Duncan HR Services are here to help.    Please do not hesitate to get in touch by emailing enquiries@fdhrservices.co.uk or by calling 0141 221 2984.

   
 Click here to see Louise McCosh's profile and contact details.

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