September 1, 2020
The furlough scheme in the UK is due to finish on October 31, 2020. Rishi Sunak is holding firm and insists it will end then. But will it? Would businesses and employees alike perhaps welcome an extension?
Our European neighbours are taking a different approach, many opting to extend or review their schemes. Some speculate that we may follow suit, so what might that look like?
France plans to meet 85% of furlough costs for up to 2 years. There are tighter restrictions on the support. It is partly designed to help struggling sectors such as tourism and automotive. The French government will also finance 80% of retraining and is investing in counsellors to give job seekers direction. Quite a scheme!
- Germany has the Kurzarbeit system (aka the short-time work scheme). It supports reduced working hours (full pay) with income replacement of 60% while not working. Its enhanced wage reimbursement scheme runs until December, but the standard scheme could run for 21 months.
- Spain is considering extending its wage reimbursement scheme (“ERTE”) until December and potentially into 2021 for the worst hit sectors.
- Italy has extended furlough support by up to 18 weeks (understood to be around the end of 2020)
In the UK, however, currently, after October the main staff-related support to UK businesses is the one-off back-to-work £1000 employer bonus. This bonus is in respect of each worker retained for 3 months until the end of January 2021. The worker must earn above £520 per month on average over that 3 month period. There is nothing beyond that.
Why would the UK reject long-term furlough?
There are positives should the scheme be extended, of course. Employees whose workplaces are not back up to capacity yet have a financial cushion to pay the bills and keep their job in the short term. However, there are also concerns that, other than the significant cost to the UK, an extension of the scheme could:
- trap employees in “Zombie” jobs that are not going to be viable given the future of the world of work.
- deter workers from looking for new jobs in expanding sectors with better long term prospects, such as the IT and the healthcare sectors.
- and, of course, there are very real concerns about employee mental health. Will extended furlough lead to feelings of isolation and inadequacy. Will employees stagnate if their skills are not being flexed and utilised? Will they have financial concerns?
2 years is a long, long time to live in limbo.
Alternatives to extending furlough
If not furlough, what other support could be provided for businesses and employees in the UK to avoid further job losses?
The government could consider:
- Retraining and upskilling
Financial incentives for businesses to embark on these initiatives.
- Hiring incentives might be another piece of the jigsaw to support businesses and in turn increase opportunities for those out of work.
The UK is investing millions into job centres and doubling work coaches to help people back to work who are on benefits. This is a start. Much more will be needed.
What can Microsoft Partners do in the months ahead?
As an employer, whatever the next few months bring, do keep talking to employees on furlough. Can you help upskill and retrain them? Are you using the flexible furlough scheme and rotating employees to avoid the deterioration in skills and potential decline in mental health.
Also, Microsoft Partners may be in a strong position to build their teams with the talent that finds themselves without work in the coming months.
And don’t forget – the furlough scheme changes on 1 September. See our blog “Furlough leave has changed…What could that mean for you?” for more detail.
Law 365 An employment guide for Microsoft Partners “How to survive and thrive. As lockdown eases – what does this mean for employers?”