'Employers are struggling' | 1 in 5 firms consider cutting jobs as furlough scheme winds down

1 in 5 firms consider cutting jobs as furlough scheme winds down

A fifth of British firms are considering staff redundancies following Sunday's furlough policy change, which will see employers contribute more, according to a new survey.

A British Chamber of Commerce poll of 250 businesses found that 18% of respondents said they were likely to make staff redundant in response to the upcoming changes to the Coronavirus Job Retention Scheme (CJRS), as reported by the BBC.

A quarter also said they would aim to reduce hours or move staff to part-time working patterns

The Chamber said extra training was needed to deal with thousands of redundancies predicted, as reported by the BBC.

What are the changes to furlough?

The CJRS was unveiled by Chancellor Rishi Sunak last year to support businesses and prevent job losses when the coronavirus pandemic hit.

The scheme guaranteed 80% of a worker’s salary would be paid by the Government.

But ahead of the scheme’s end in September, the state support is gradually decreasing. Since July 1, employers have been asked to contribute ten per cent towards the wages of furloughed workers for hours their staff do not work.

From Sunday, Government payments will reduce to 60% towards salaries, with employers paying the remainder.

According to the most recent figures up to June 30, about 1.9million workers were on furlough, down from a peak of 5.1million in January.

The scheme has reportedly supported more than 11million jobs since it was introduced.

The BBC reported that Jane Gratton, Head of People Policy at the chamber, said the changes to furlough "will likely result in many thousands of people being released back into the labour market, as employers who are still struggling to recover from the recession are forced to make redundancies and cuts to working hours".

She said it was "crucial" that employers and the Government give returning furloughed workers the support and training they need "to be re-engaged and productive".

Legal concerns 

Following this news, Karen Holden, CEO of A City Law Firm, told HR Grapevine that employers must demonstrate that any redundancies were "genuine" and that the departing employee's job would no longer exist following the redundancy.

"With the furlough scheme set to be entirely phased out by September 2021, employers across the country will invariably be forced to lose staff over the coming months," said Holden.

"For employers that are considering making employees redundant, it is vital that the redundancy be genuine and follow a documented and fair process, and it must be demonstrated that the employee’s job will no longer exist after being removed."

Failure to do so could put firms at risk of tribunal appeals for unfair dismissal, she explained.

"If employers decide you need to make redundancies, they must:

- Identify which employees will be made redundant
- Make sure they select people fairly and do not discriminate
- First of course they must see whether they could find a suitable alternative or employees are going to be actively encouraged to look at job sharing or part-time work in order to retain staff."

Holden went on to cite several examples of "genuine" reasons why a worker might lose their job during the pandemic, including:

- New systems in the workplace have been implemented which has caused certain jobs to be unnecessary
- The need for the worker has diminished or ceased
- The job no longer exists because other workers are doing the work that certain workers previously carried out
- The workplace has closed or is closing down

"It is vital that employers follow these processes and demonstrate a genuine ground for redundancy as failure to do so could leave the employer open to a possible claim for unfair dismissal at the employment tribunal," Holden added.

She continued: "It’s going to be a very challenging time for staff and employers alike trying to restructure, budget and choose those selected for redundancy wisely. Even paying the redundancy sums will cause a cash flow concern for the businesses so careful consideration will need to be paid."

Lowest-paid to be hit hardest

Last month, the Institute for Fiscal Studies (IFS) expressed concerns that the change in the rules regarding furlough may well prompt a wave of unemployment, as businesses struggle with the financial weight of retaining staff.

Tom Waters, Senior Research Economist at the IFS, told the BBC: "The furlough scheme does need to be wound down as the economy recovers, rather than attempting to keep every job on life support. But this does mean that some will end up unemployed."

The Treasury responded to the concerns, stating that it believed the funding was still ‘substantial’ and that as such, businesses would likely be able to continue using the scheme.

"We deliberately went long with our support to provide certainty to people and businesses over the summer. The furlough scheme is in place until September and is amongst the most generous schemes in the world," a representative from the Treasury told the BBC.

And in June, an annual assessment by the think tank Resolution Foundation, anticipated increase in unemployment is likely to hit lower-paid workers the hardest. This is said to be in line with the experience of the financial crisis more than ten years ago.

Recent data from Government has found that there were still 3.4million furloughed jobs by 30 April, 2021. This figure is lower than previous as more workers have started to return to work following the easing of coronavirus restrictions.

It also found that retail, hospitality and leisure are the biggest low-pay sectors and accounted for a large volume of people returning to work in April this year.



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