End of the furlough scheme – are fears of a spike in unemployment well-founded?

Last Friday (1 October) marked the end date of the government’s coronavirus furlough scheme. Several economic forecasters, including the Bank of England, have predicted a wave of redundancies and corresponding rise in unemployment as the scheme ends. But is the picture really as bleak as this? 

05 October 2021

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Last Friday (1 October) marked the end date of the government’s coronavirus furlough scheme which since the start of the pandemic has subsidised the wages of more than 11 million workers.

The latest government statistics – published on 29 July 2021 and available here – showed roughly 1.6 million people still in receipt of emergency wage support at the end of July. Several economic forecasters, including the Bank of England, have predicted a wave of redundancies and corresponding rise in unemployment as the scheme ends. But is the picture really as bleak as this?

The reality is that there are signs that many businesses, particularly of small and medium-size, are opting where possible to put employees on reduced working hours rather than making redundancies. This can be seen clearly in the fact that in August, only 143 employers in Scotland, England and Wales submitted HR1 forms – these being the forms required when redundancies of more than 20 people are proposed. By contrast, the average number of employers submitting HR1 forms per month prior to the pandemic was closer to 300.

While it will not be possible for every employer to offer reduced working hours to its employees, the arrangement, whether on a temporary or permanent basis, brings with it clear advantages. Many employees will be amenable to the idea of working perhaps one day less per week in order to retain their current employment, and one could argue this is especially true given the recent shift in attitudes towards work-life balance that some people have experienced as a result of the pandemic. From the employer’s perspective, the advantages are numerous but include (i) avoiding the costs associated with redundancy, and (ii) keeping hold of those staff members who are perhaps long-serving and have a good understanding of the business for which they work.

On a similar note, it is worth mentioning that some furloughed workers will almost certainly be able to find work in recovering sectors such as hospitality and travel. According to ONS data, vacancies in hospitality increased by roughly 75% between June and August 2021, and the total number of vacancies in the UK is currently at an all-time high of over one million.

If employers do make furloughed staff redundant, they will still be entitled to redundancy pay and notice. The employer may still require the employee to sign a settlement agreement and if more than 20 redundancies are proposed, the employer will have to consult either with a recognised Trade Union or the employees’ representatives. Failure to do so would be a breach of s.188 of TULR(C) Act 1992 entitling each employee to a protective award up to a maximum of 90 days’ pay.

If you have any questions about the above topic, please get in touch with our employment team.

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Laura Dodson