What Happens when the Furlough Scheme Ends? | Blog | Logbook Loans



What Happens when the Furlough Scheme Ends?

The government’s furlough scheme is due to end on 31st October. Since it was introduced on 20th March, around 10 million workers in the UK have been helped by the Coronavirus Job Retention Scheme.

Over the past five months, it has allowed millions of employees who were unable to work because of coronavirus to receive 80% of their normal wages, up to a limit of £2,500 per month. Now, the scheme is due to come to an end, after the easing of lockdown restrictions.

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The scheme was originally due to end on 31st May when it was first announced, but it was allowed to continue as the pandemic continued. However, Chancellor Rishi Sunak said that the government must start weaning workers off the subsidised salary support scheme.

How will the end of furlough affect jobs?

Critics fear the end of furlough will lead to mass redundancies, as employers adversely affected by the lockdown will be unable to afford to pay staff. Research by the think tank, Bright Blue, suggests 44% of companies with staff currently on furlough will be forced to make some, or all, of their employees redundant when the scheme ends.

In an effort to prevent the anticipated job losses, the government has announced a further incentive, offering employers a £1,000-bonus for every furloughed worker who starts work again and remains in continuous employment until 31st January 2021.

However, analysts say it will be a long road to recovery for the British economy, with millions of people fearing for their jobs. The companies who have reopened admit social distancing is a problem when it comes to normal day-to-day operations.

Are many businesses operating normally again?

Only 23% of businesses say they are operating normally, with 13% saying it’s impossible to remain open due to the safety restrictions.

More than 500 UK businesses were surveyed as part of the research and almost 10% said they would be laying off most, or all, of their furloughed staff after 31st October. Just over 30% said some of the staff would be made redundant.

How has the furlough scheme changed since March?

The furlough scheme began winding down from August. There were no changes in June, after it was first extended, apart from preventing any new claimants from signing up from 10th June. In July, the government advised furloughed workers could start to return to their workplace part-time.

From August, employers were required to pay their employees’ National Insurance and pension contributions. In September, the government support will reduce to 70% and employers will have to pay 10% of their employees’ wages.

In October, the final month of furlough, the government will pay 60% of wages, with the employer paying 20% before it stops altogether on 31st October.

How many businesses used the furlough scheme?

Around two-thirds of all UK businesses, equating to 1.2 million employers, have taken advantage of the furlough scheme, according to research by the British Chamber of Commerce.

At least 75% of the workforce has been on furlough for one-third of the companies. The scheme has cost the government almost £32 billion already and Mr Sunak says it “can’t go on forever”.

Can I be made redundant while on furlough?

Under the rules of the scheme, even furloughed employees can be made redundant at any time, although firms can’t use the furlough money to subsidise redundancy packages. Once the furlough ends, a surge in redundancies is expected.

Can I work if I’ve been furloughed?

When the scheme began, staff on furlough weren’t allowed to work for their employer at all, until being allowed back initially part-time in July. They were permitted to do volunteer work, with certain restrictions.

What are my employment rights?

Anyone on furlough retains the same employment rights as they would in normal times. Until the scheme ends, a furloughed employee can agree with their employer to be put on “flexible furlough”, meaning they are permitted to work at least some hours.

Can I get sick pay and bonuses?

Any worker who is ill is eligible for statutory sick pay or can be placed on furlough. Anyone shielding, on unpaid leave, or with caring responsibilities, can also get sick pay.

How are people surviving?

People have increasingly turned to borrowing money in the shape of credit cards and short-term loans to support their day-to-day needs during the pandemic. UK businesses have borrowed an extra £34.1 billion in loans from banks, according to the Bank of England.

Analysts say companies and individuals will be taking steps to control their debts for the foreseeable future and may need to take out further short-term loans to help with the transition, as the furlough scheme comes to an end.

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