This week saw the first set of changes to the Coronavirus Job Retention Scheme.
From yesterday (Thursday 1 July) the level of grant given to employers for employees on furlough is reducing and will continue to gradually reduce through July through to September as per the following table from the Government website
To remain eligible for the grant employers must continue to pay their furloughed employees at least 80% of their wages (up to a cap of £2500 per month). So there is no financial change for employees on furlough.
So, what is the effect of this?
There is no immediate effect on employees who are furloughed. Wages will remain the same and they will require to remain the same throughout the period until the scheme comes to an end in October.
However, the reality of employers having to pay more for employees’ wages, while their businesses continue to be closed and/or are unable to operate at full capacity due to social distancing restrictions, may mean that employers will begin to consider whether or not they can continue to employ those employees on the same basis as we reach October when the scheme ends.
Without a furlough scheme, the horrors of the early days of the pandemic, before the furlough scheme come flooding back: employers seeking to make unilateral changes to employment contracts; cutting hours; attempting to use, or misuse, short term lay off provisions or forcing employees to use holidays as they try to deal with the consequences of the pandemic.
It is hoped that given everyone knows what is expected to happen in October it will be less chaotic then, but in reality that is more than likely a hope than expectation. Employers are, perhaps rightly, likely to leave things to the very last minute in the hope that the Government will retain some kind of support scheme.
In recent days we have seen trades unions have called for an extension of the scheme to ensure that levels of unemployment do not rise to unsustainable levels.
The demographic of those on the furlough scheme is also beginning to be a cause for concern. This week, the Resolution Foundation, found that 1 in 4 workers aged between 55 and 64 have remained furloughed since the recent lockdown.
In addition, the Institute for Fiscal Studies has recently reported that Londoners, women and workers in the cultural, accommodation and food sectors are still more likely to be furloughed.
It is very much a watch and wait situation, to see how the furlough scheme pans out. However, the UK Government require to be very careful – when coming to future decisions – to ensure that certain groups of society do not face long term unemployment due to the premature ending of support for businesses which, but for ongoing restrictions due to the pandemic, would be entirely viable.
Further information on Furlough can be found here.
Blog by Jillian Merchant, Associate