Is Furlough now just ‘Kicking the Can Down the Road’ and allowing Unviable Jobs to Survive Short Term?
Gemma Murphy, Director and HR Consultant at ViewHR Gives her Views
The Furlough Scheme has now been extended to the end of September 2021, with some tapering of the Government’s contribution beginning in July. There is no doubt that the scheme has helped the country avoid the huge rise in redundancies that many were predicting 12 months ago. But has it just enabled financially distressed businesses to keep unviable jobs going? And what will happen to such jobs when the scheme ends?
We are grateful to HRView’s Gemma Murphy for her views, who suggests the reality for many businesses is that many jobs protected by Furlough are likely to be unviable.
“At ViewHR, we have had the unfortunate job of working with many businesses who have had to make redundancies during the pandemic. On the positive side, this has allowed the businesses involved to be sustainable so that they can focus on what they have left and the skills they have to help grow their businesses in the right direction.
Whilst the opportunity to keep more people employed on Furlough longer is of course wonderful, I cannot help but think that many businesses are kicking the can down the road. Ultimately, the Furlough scheme exists for what will be viable jobs down the road but instead there are strong signs that many unviable roles are surviving just because of the scheme.”
Gemma Recommends Businesses Look Closely at What Jobs are Viable Once Furlough Ends
“I would encourage businesses to really look at the roles they currently have furloughed and whether or not they are viable once furlough ends. This is because:
- Understanding your true business model going forward allows you to strategically and financially plan better;
- There are costs associated with furloughed employees such as the accrual of holiday, length of service and also the introduction of contributions from August;
- Furlough cannot be used for notice periods;
- If ultimately employees will have to be made redundant, the costs will become higher as service increases as there may be the risk of claims.”
Businesses Should be Planning for the Post Furlough Era Now
“We have all learned a lot through this pandemic and certainly businesses have had to change. It is important as business owners that we review what steps our businesses need to take over the coming months and the structure our businesses need to take.
If a business does need to make redundancies, it is critical that they follow a fair and reasonable redundancy consultation process. Failure to do so will in the long run result in costly claims in the employment tribunal. So many businesses try to save money and take short-cuts at the restructuring stage only to have to pay it back in compensation costs later. This can be crippling to a business.”
Businesses are still sheltering from the worst of the Covid-19 Impact
Antony Batty & Company’s view is that:
“Gemma’s insights, from an HR and redundancy perspective are very useful, and we would echo her recommendation that businesses should be planning for the post Furlough period now.”
“Although the Insolvency Service’s latest figures for formal corporate insolvencies show that business insolvencies fell by 9% to 686 in February 2021 compared to January’s figure of 754, our view is that these figures mask the ongoing problems faced by many businesses, who are surviving only because of the various Government support packages and the protection in place against aggressive debt recovery actions, for example.”
“As the insolvency and restructuring trade body R3 points out:
‘Government support has been and continues to be a lifeline for many – and has stemmed rather than stopped the flow of insolvencies we would expect to see in this kind of economic climate.
In addition, the usual ‘trigger points’ for action, such as winding-up petitions or repossession notices, are out of the picture at the moment, and our members say many company directors are putting off examining their options as a result.’”
We Recommend Businesses Take Early Action to Review Their Options and Plan for the Future
Antony Batty & Company’s view is:
“Anecdotally, we are aware that pressure is mounting on many businesses that are just about surviving as their debts grow due to Covid-19. As the withdrawal of the support and protection packages starts to loom, it is difficult to see the second half of 2021 as bringing anything other than even greater challenges to businesses.”
“This is why we recommend that businesses talk to our Insolvency Practitioners, and specialists such as Gemma at ViewHR, to get the help and advice they need to do the best they can for their businesses.
Click here to contact Gemma. We can be contacted directly at any of our offices below. The first discussion is Free of Charge.”