Furlough extension: too little too late?

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It’s been a frustrating few weeks for employers. Many had been preparing for the introduction of the Job Support Scheme this week, but those plans may have now found themselves in the bin with the confirmation that furlough will remain in place until the end of March 2021.

Barely two weeks ago the chancellor announced a revised Job Support Scheme, which offered different levels of wage support to employers depending on which local Covid ‘tier’ they were affected by – essentially, if they were open or closed (JSS Open and JSS Closed).

Just as employers got their heads around that, last weekend Boris Johnson announced a new four week lockdown in England. This was accompanied by the announcement that the Coronavirus Job Retention Scheme, which was due to end a matter of hours after Johnson’s press conference, would be extended until at least 2 December – the date England’s lockdown is expected to end.

Now, however, chancellor Rishi Sunak has exacerbated employers’ frustrations even further by announcing that the Coronavirus Job Retention Scheme will be in place until the end of March, paying 80% of furloughed employees wages – a level of financial support that hasn’t been available to employers since the early summer. This could mean JSS Open and Closed may never be put into practice.

The Job Retention Bonus, which many employers may have been hoping to receive, has also been scrapped for the foreseeable future.

Too little too late?

While this increase in support for employers will be welcomed by many, for some it will be seen as too little too late – particularly those who have shed swathes of their workforce in anticipation of the furlough scheme’s closure on 31 October.

“Employers have been left confused by the government’s plans to protect jobs over the last few weeks, with many redundancies triggered over the uncertainty around the end of the furlough scheme and the introduction of two new Job Support Schemes,” said CIPD chief executive Peter Cheese.

He said extending the scheme until March would give employers more time to plan ahead and minimise redundancies over the difficult winter period, but many jobs had already been “unnecessarily” lost through the frequent changes.

“Jobs have already been lost unnecessarily through short-term thinking because of the lack of longer term certainty of support, and it is crucial policy-makers try to look further ahead and work with employers to help them plan forwards and protect employment as much as possible,” he said.

Ranjit Dhindsa, head of employment at law firm Fieldfisher, described the announcement as a “knee-jerk reaction to the lack of interest in the Job Support Scheme and [initial] four-week extension of furlough”.

“The extension of furlough might be too little too late for businesses. If the government are now hoping to halt planned redundancies by providing a four-month furlough extension, they should have said that initially and announced this weeks if not months ago,” said Dhindsa.

“Businesses are looking for long-term or at least short to medium term solutions from the government. They want at least six months of certainty. There’s a lot of administration that goes into preparing for job cuts and this announcement is unlikely to stop businesses in their tracks.”

Although organisations were able to re-employ staff who had recently been made redundant to put them on furlough, Dhindsa said this would be costly for employers both in terms of administration and employers national insurance and pensions contributions.

JSS plans

Paul Holcroft, managing director at HR consultancy Croner, suggested that the preparations for the Job Support Scheme and any hopes for a Job Retention Bonus may not entirely go to waste, as there was still a possibility that these schemes would be introduced after March.

“For those employers who planned to use the new Job Support Scheme, it has been made clear that this scheme has been postponed indefinitely. Whether something of a similar nature to it will be announced come March does remain to be seen,” he said.

“Another central point made by the chancellor today regarded the Job Retention Bonus, which was originally designed to incentivise employers to keep previously furloughed staff on once the scheme comes to an end. It has been confirmed that the bonus as we expected it would no longer be available, and future incentive schemes will be announced in due course.”

Carsten Jung, senior economist at the IPPR think tank, said the JRB should be tweaked ahead its reintroduction.

“In its current form, it is poorly targeted and wasteful. Instead of a blanket one-off payment, the Job Retention Bonus should be reformed to work as a part-time work subsidy that incentivises firms to hold on to as many workers as possible on a part time basis. It should pay firms for a share of the wages that its employees earn working part-time, in addition to reimbursing workers for hours not worked,” he said.

Sigh of relief

However, some commentators maintained that the chancellor’s announcement came as positive news, particularly to firms that the CJRS has been a “lifeline” to in recent months.

Rain Newton-Smith, chief economist at the CBI, said the chancellor had “built a bridge for business to Spring 2021” and helped firms survive the winter.

“Extending the tried and trusted Job Retention Scheme will give companies the certainty and stability they need to help safeguard thousands of jobs into March. Sectors and supply chains under the greatest strain may need more tailored support in the coming weeks,” said Newton-Smith.

“The government must now use its time wisely and the review in January to get ahead of the curve and invest in a long-term vision for the economy. The Covid crisis makes the next six months even more crucial for government to pursue its levelling-up ambitions and work towards a net-zero economy. Investing in infrastructure, skills and innovation at the next Spending Round will lead to a swifter recovery and a brighter future for our country.”  

Mike Hibbs, an employment lawyer at Shakespeare Martineau, said: “On day one of the second national lockdown, it’s no surprise that the chancellor has announced an extension to the furlough scheme until the end of March. After being a lifeline for countless businesses over recent months, the news that the support is continuing will undoubtedly be met with sighs of relief.

“Even under a new lockdown, many sectors – retail and hospitality – will be preparing for Christmas trading and managing staffing levels could prove to be tricky. A careful juggling act will be needed to strike a balance between taking advantage of the furlough scheme and ensuring adequate staff numbers are in place to meet heightened demand.”

On this point, many employers will be wondering how to handle annual leave for both furloughed workers and staff working their normal hours as the end of the year looms. New regulations introduced in March allow those for whom taking holiday is “not reasonably practicable” during the pandemic to carry up to four weeks leave over into the next two leave years. In situations where staff have a lot of holiday left to take before the end of the year, employers are also able to request an employee takes their holiday on fixed dates, so long as they give twice as much notice as the period of leave to be taken.

Fergal Dowling, partner at law firm Irwin Mitchell, said of the chancellor’s announcement: “This is a really significant development … It may mean that some employers will delay their redundancy exercises and although this should be welcomed, many organisations will be frustrated by the last minute nature of the decision and the fact that it will be too late for some.”

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