Beyond furlough: the future for your business

If you’ve been using the Coronavirus Job Retention Scheme to support your business over the past 15 months, you are certainly not alone. As of May 2021, a total of 11.5 million jobs have been furloughed during the pandemic across 1.3 million different employers. That’s an incredible number of livelihoods and businesses protected. But how many of these employers have started to think about what comes next? With the scheme starting to wind down from July 2021 ahead of its current end-date of 30th September 2021, what are the next steps for your business?

At the start of the first lockdown, many businesses faced with closing their doors for an unknown period panicked (understandably) and were about to start making large scale redundancies. On the Friday evening that the Coronavirus Job Retention Scheme was introduced back in March 2020, redundancy letters were literally ripped up as employers and HR professionals across the country got to grips with writing furlough agreements instead. A lifeline for so many organisations and individuals.

Early in the pandemic, many businesses were in the same boat. Over time, organisations have charted different paths – some now well and truly on dry land adapting and thriving, others still cast adrift, having been required to remain closed for a newly extended period. This means that there is no “one size fits all” approach for planning ahead as the landscape changes. 

The furlough lifeline will not be around forever. The scheme is changing from July ahead of its scheduled closure at the end of September 2021. In addition to covering pension and NI costs, employers will have to pay 10% towards furlough pay in July, increasing to 20% during August and September. This means that furloughed employees continue to receive 80% of their usual pay as the government contribution reduces. Despite continued closures and disruption in some sectors, the government has reiterated that there is no change to the scheduled winding down of financial support. With steadily increasing costs for employers to continue to protect furloughed workers, managers need to think carefully about which jobs are viable moving forwards.

But this doesn’t have to be all doom and gloom. Positivity and creativity are your friends. There are many options for employers to consider when thinking about making staffing changes.

Firstly, think about how your business has changed and adapted – this could be changes to the technologies you use, your marketplace, your ways of working. Perhaps you have shifted to more digital operations, different opening hours or hybrid working practices. All of these factors will impact your staffing needs – the mix of skills you need to thrive, shift patterns, volume of staff, the amount of office space needed and associated costs.

Secondly, whilst we don’t have the luxury of a crystal ball, think about how you envisage your business changing over the coming year. Plan out different scenarios. Wherever possible, if you can carry the increased costs of furlough in the short-term, this may pay dividends later because you will retain knowledge and expertise in your business. Recruiting additional staff is expensive – this can run into thousands of pounds when you consider not only advertising or agency costs, but also management time, induction and training, loss of productivity until a new starter is up to speed. Compare these potential recruitment costs to the costs of retaining staff under furlough. Factor into your equation the cost of carrying out a redundancy process, including staff time during the consultation process, redundancy pay, notice pay (you cannot use furlough during notice periods) and paying any accrued holiday in lieu. Careful, balanced decision-making rather than knee-jerk reactions is the order of the day.

Thirdly, if you think you may need to reduce costs and consider redundancies, ensure you carry out a meaningful consultation process. Sometimes, entering into a consultation period can feel like a tick box exercise where both parties feel that the proposal is a “done deal”, however entering into the process with an open mind can pay dividends. This is where you can discover unexpected creative solutions from across your team. A business owner does not have all the answers – many heads are better than one. Examples of potential solutions to reduce staffing costs whilst avoiding redundancy include:

• Job shares or reductions in hours. The pandemic has caused many people to reassess their priorities and strive for a change to their life-work balance. You may be surprised at the options that team members will consider.
• Changes to overtime thresholds. By increasing the threshold for paying an enhanced overtime rate, this could save wage costs overall.
• Upskilling or changes in role – if a specific role is proposed as redundant because it is no longer required, you may have a need for a new employee with a different skillset due to changes in your business. There may be options, such as using an apprenticeship scheme, to support an employee moving into a different role within the business and gaining the new skills that you need as an alternative to redundancy. Apprenticeship levy funding is available to employers for existing employees as well as for new recruits.
• There may also be alternative ways of reducing overheads, such as by leasing less office space by adopting hybrid working, where team members work more flexibly with a combination of homeworking and office-based work.

Any such changes would need to be consulted on and confirmed in writing as they are a change to the employment contract. With changes in the law about what needs to go into an employment contract coming into force earlier in the pandemic in April 2020, if you missed the opportunity to update your employment contracts, it would be a good idea to check your contracts are still fit for purpose.

Fourthly, as you bring your teams back together, don’t underestimate the significant emotional impact of the prolonged series of lockdowns. Everyone’s experience has been different. Be kind and make support available, whether that’s through employee counselling services, mental health first aiders, or simply regular open-door communication. It will take a long time to readjust, as individuals, teams and wider communities.

Finally, to repeat the opening of this article, with 1.3 million employers having used furlough, you are not alone. Talk to your peers, your professional advisers or the Growth Hub team for support with the decision-making process. As the owner of a local HR consultancy, we have supported many local businesses over this period, but have started to see a significant shift in activity from restructuring (which filled our diaries in June 2020) towards recruitment and training (has kept us busy in June 2021). We finally feel that businesses are starting to lift their heads and look forwards positively, which can only be a good sign.

Kathryn Roynon

Chartered MCIPD FREC

Director, KR HR & Training Consultancy Ltd