Yahoo Finance What happens to furloughed workers when the government scheme ends?
Since the UK went into lockdown in March, businesses across all industries have been forced to close, leaving millions unable to work. While some have been made permanently redundant, many have been furloughed under the government’s job retention scheme.
Through the scheme, the government pays employees 80% of their salary up to a maximum of £2,500 per month. In total, around 9.6 million jobs from 1.2 million employers have been furloughed, at a cost of around £33.8bn ($44.2bn) so far — a number expected to rise to £80bn by the time the programme comes to an end in October.
Some workers have been able to return to work with the reopening of pubs, restaurants and shops, but many are still waiting to find out when — and if — they can get back to normality. So what will happen when the scheme comes to an end?
What will happen over the next few months?
The Coronavirus Job Retention Scheme was originally scheduled to finish at the end of June, but was extended until the end of October. Since 1 August, employers have had to pay employee's National Insurance Contributions and pension contributions.
READ MORE: How to mentally prepare for returning to work after furlough
Chancellor Rishi Sunak has said that from August, employers will need to “share with the government the cost of paying salaries” as the level of state support will gradually be reduced.
“Our Coronavirus Job Retention Scheme has protected millions of jobs and businesses across the UK during the outbreak — and I’ve been clear that I want to avoid a cliff edge and get people back to work in a measured way,” he announced in May.
“This extension and the changes we are making to the scheme will give flexibility to businesses while protecting the livelihoods of the British people and our future economic prospects.”
Until 31 August, the government will pay 80% of furloughed employees wages up to a cap of £2,500 for hours not worked. In September, the government will pay 70% of furloughed employees wages up to £2,187.50 for hours not worked.
From 1 October until the end of the scheme on 31 October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee doesn’t work.
What will happen when the job retention scheme ends?
From the end of October, the idea is that employees will be able to return to work. However, the road to economic recovery will be long, and businesses may not be able to bounce back financially this year. The Bank of England’s latest monetary policy report has predicted that UK GDP won’t recover to its pre-coronavirus size until the end of 2021.
The Chartered Institute of Personnel and Development (CIPD) states that employers have several options if they decide all of the existing workforce are not needed when the furlough period ends.
Firstly, businesses may agree to reduce working hours with some or all staff. They may also furlough workers for an extended period or consider other strategies, such as stopping recruitment, reducing overtime, offering sabbaticals or other alternatives to redundancy.
READ MORE: What is permalancing — and what are the pros and cons?
However, if businesses’ trading conditions have not improved enough for all furloughed employees to be brought back, redundancies are possible.
The HR law firm Lewis Silkin states: “This is significant because other European countries that have similar schemes in place are imposing restrictions on employers making redundancies. No such conditions are being imposed in the UK.”
On 30 July, new laws were introduced that mean furloughed workers who lose their jobs will receive redundancy pay based on their normal wage, rather than their reduced furlough pay. It’s important to note that employees can be made redundant during the furlough period too, before the scheme comes to an end.
