Covid: Furlough scheme set to wind down further

Covid: Furlough scheme set to wind down further

7/29/2021 5:51:00 AM

Covid: Furlough scheme set to wind down further

Employers will have to contribute more to the job support scheme before it is phased out in September.

Getty ImagesFurlough will be wound down further from Sunday as the government asks employers to make a bigger contribution to the wage support scheme.An estimated 1.3 million people were on the scheme at the beginning of July, down from a peak of 5.1 million at the height of lockdown in January.

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The scheme has been extended several times but will end on 30 September.It is credited with stopping a spike in unemployment and some fear jobs will be lost when it ends.The scheme, drawn up after lengthy talks with business groups and union leaders, has cost taxpayers almost £50bn to date, arousing fears

taxes will have to rise to pay for it.Under the Coronavirus Job Retention Scheme (CJRS), known as furlough, staff receive 80% of their current salary, capped at £2,500 per month.image copyrightimage captionLucy Walker-Evans spent nine months on furlough before being made redundant

Lucy Walker-Evans from Chepstow was working as an account manager for a global hotel chain when she was put on furlough in March last year.The 45-year-old spent the next nine months on paid leave, a time she found harrowing at first."It felt like you were skiving off work, you kept waiting for the phone to ring, constantly felt guilty," she told the BBC.

"There was lots of crying, lots of worry, lots of uncertainty."'Transformational experience'In January she was made redundant, but the time off had given her a chance to take stock.She realised she wanted a less stressful job and to work in charity, and by February she had managed to find a role working at a local shelter for young homeless people - a job she loves.

"If had I not been furloughed I would never have had time to think about my career, so it was a transformational experience really," she told the BBC."I also had a year to learn to live on a lower salary - you realise you don't always need to chase the next pay rise."

The government has largely footed the bill for furloughed workers, but since 1 July employers have been asked to contribute 10% towards the wages of furloughed workers for hours their staff do not work.That amount will rise to to 20% in August and September.

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It will make the scheme less appealing to employers, although firms are relying on it less as the economy reopens.image captionJo Shippen says her staff were "understanding" about being furloughedJo Shippen, managing director of Hatters Promotions, a promotional merchandise and print company in Stockport, said the furlough scheme had been a "godsend" for her business and staff.

"Without the furlough scheme I would have to have let people go, I just would not have managed," she said."I know for a fact I would not have been able to run my business. I would not have been able to embrace the change and I would not have been able to adapt in the way we have adapted."

Although many businesses had to completely cease trading during the lockdowns, Hatters was able to continue operating, but it "pivoted" away from events and conferences to supplying products for companies looking to improve staff engagement.

Ms Shippen said she had been "really lucky" that her staff were "understanding" about being furloughed."They knew from the outset that the mission was to get them all back together at the end, and to make sure that we just got through this," she added.

Since the start of the scheme, a cumulative total of 11.6 million jobs have been supported by the CJRS at various timesBut according to Tony Wilson, director of the Institute of Employment Studies, the number of people on furlough has been "dropping like a stone" as industries start to reopen.

From the end of April to the end of May alone, those using the scheme fell by a third, from 3.5 to 2.3 million.At the same time, Mr Wilson said, the unemployment rate has been broadly flat in recent months - suggesting that fears of a "rush of redundancies" caused by furlough being phased out have been unfounded.

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"Either employees are being brought back to work by their employers or they are being taken off furlough and leaving the labour market," Mr Wilson told the BBC."That could be young people going into full time education rather than seeking work."

The top five industry groups with the highest rates of jobs being put on furlough at 31 May 2021:Air passenger transport (57%)Hotels and similar accommodation (57%)Travel agency and tour operator activities (51%)Photographic activities (43%)Beverage serving activities (43%)

Source: ONSHowever, he noted some industries will be more exposed than others when the scheme finally ends, such as aviation and transport, which remain subject to restrictions.And support jobs such as office cleaning, security and delivery could also be lost if workers do not go back to the office in the same numbers due to the rise in home working.

"But that is a societal and economic change we have to deal with," Mr Wilson said."The answer is not extending furlough but re-skilling people to take up the record number of new vacancies being advertised."'Too much, too soon'

Tom Waters, senior research economist at the Institute for Fiscal Studies, said there is "no way to know exactly" how many jobs would have been lost, and for how long, had the furlough scheme not existed."But given that unemployment has only risen slightly since the start of the pandemic, despite the biggest fall in GDP ever recorded, I think it's fair to say that furlough has had a very significant impact on job retention," he added.

The Trades Union Congress said it was "great" so many people had been able to return to work from furlough, but added some firms still required it ."Doubling the employer contribution is too much too soon, putting jobs at risk in some parts of the economy," said Frances O'Grady, the union's general secretary said.

image copyrightGetty ImagesLaura Kearsley, head of employment law at Nelsons Solicitors, believes a lot of employers will review their workforce in the light of the furlough support being removed, and she thinks that might result in an uptick in redundancies.

"I think we will see a lot of employers trying to agree measures that keep people in a job, such as reductions in pay or reductions in hours, changes in operating models," she said."There is a real sense of feeling that they [businesses] were trying to hold out and hoping things would get back to normal more quickly. But in some industries it's just not clear what the trading picture will look like in the next three to six months."

For people worried about redundancy, the "best thing you can do is be prepared", said Ms Kearsley."Find out about your rights. Dig out your employment contract, whatever you signed when you joined."Also ask for a company handbook or policy information about redundancy, that should set out what you can expect if you do find yourself in that situation."

Read more: BBC Health News »

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