Furlough Phase Out: What does it mean for you?

Furlough Phase Out: What does it mean for you?



 

The moment we have all kept in the back of our minds has now arrived. As of July 1st, the shift has begun towards the end of the furlough scheme.

553,000 people have lost their jobs since the beginning of the pandemic, and the furlough scheme has undoubtedly been responsible for this number being as relatively low as it is. At its peak, 10 million people were benefiting from furlough, while the overall cost to the government has been a knee-shaking £66bn. 

As of April 2021, 3.4 million people were still on furlough, a fall from 5.1 million in January. This number is still declining – by the end of May it was at around 2.4 million, according to HMRC figures, and current estimates for June are between 1.3-1.9 million. 

This tapering of furlough means that, from July 1st onwards, employers must contribute 10% of their employees’ wages for the first time since the beginning of the pandemic, while the government contributes 70% where it previously covered 80%.

Between August and September, employers will then have to raise their portion to 20% of employees’ wages, while the government’s input drops to 60%. As of September 30th, the scheme will end entirely, and employers will pay the full amount once again. 

This is causing anxiety to both employers and employees alike, for obvious reasons, and numerous questions are being raised. Will the economy be back on its feet enough to sustain paying full wages again? Is September 30th yet another arbitrary deadline which will inevitably be extended? Or is this the real deal? 

It seems pretty set in stone. PM Boris Johnson and Chancellor Rishi Sunak are determined to make this the final chapter of furlough support, with Johnson commenting that, ‘on the basis of what we can see now in the data … we don’t think we’ll need to change’. After the previous four extensions, the government will be highly reluctant to venture for a fifth furlough. Unless something drastic happens, with a large rise in infections and further restrictions necessary, it seems that September 30th is the final full stop to furlough.

September 30th is, in the government’s eyes, sufficient time to give businesses a chance to reopen and get back on their feet, and to prevent the need for another extension. From then on, they’re by themselves – employers will have to decide whether to take full time employees, or to make them redundant, unless another extension is decided. But for how long can this game of cat and mouse continue? 

Business Secretary Kwasi Kwarteng adds to this sense of furlough finality, though tries to offer reassurance: 

‘The furlough isn’t simply being switched off. All we’re saying is that the employer should contribute something to the payroll, and then over time, over the next three months, the furlough will be taken away. It’s a difficult balanced decision to make, the furlough wasn’t going to last forever’. 

 

We knew this all too well, but the shock is still going to be heavy for a large number of people. Many business leaders believe that September 30th is an insufficient amount of time to be able to take on employees full time, and so the likelihood is leaning towards redundancy. Redundancy is becoming an inevitability for potentially hundreds of thousands of people.

Terry George, who owns the Mission night club in Leeds, as well as other hospitality venues, is fully anticipating having to make many of his staff redundant by the time September 30th arrives. ‘We can’t afford to pay people out of a pot that has no money coming in. We’re going to have to lose some staff’. 

What’s worse, is that we may have less time than it seems. September 30th might be the cutoff, but it’s perfectly clear to employers where things are headed. Every month between now and September is going to cost employers more money in wages – money that they don’t have. 

Redundancies will likely begin sooner rather than later, though perhaps not immediately. Hargreaves Lansdown personal finance analyst Sarah Coles has suggested that, although ‘they might not make anyone redundant on day one, their jobs will be under increasing threat as time goes on and government help is withdrawn further’. 

It might not be an instant change, then, but that’s not necessarily cause for hope. The possibility of a later redundancy is strong. The Institute for Fiscal Studies backs this speculation in their recent statement: ‘With the cost of keeping employees on furlough rising, we therefore expect to see rising redundancies over the summer even before the final end of the scheme.’ 

Realistically, there is only one way out of this. It is to embrace a change of career, to invest in your future and protect yourself from a crumbling job market. If you are still on furlough after all this time, and have not been able to resume work, the chances of facing redundancies are not slim. The next few months could see you out of work, and bereft of crucial government support.

But one sector of security, as proved by the stability of the last year, is the construction industry. Swathes of people have left their old jobs to begin afresh as a tradesperson, or have balanced retraining with their old job to supplement their falling wages. People have taken this time to upskill, to add to their employability, so that when things are back to normal, there is a career there waiting for you. 

The construction industry has survived first, second, third waves of lockdown. Trade work has still been able to continue despite restrictions, thanks to the efficiency and professionalism of its workers. The flexibility and adaptability of the industry has meant that crucial work has been able to go ahead. 

But what is clear is that construction work simply cannot be put on pause for long. Whether it’s large scale infrastructural work or domestic projects, people need tradespeople to keep working, to keep pushing through. Demand has not dwindled for a second, and has in fact continued to rise. Wages have not fallen, they have risen. Job vacancies have not been swallowed up, they continue to offer opportunities to workers. 

We need skilled, qualified tradespeople more than ever. And in the next three months, a career in construction might be the thing that makes the nightmare of the past year go away. All it takes is that burst of self belief, to take your future into your own hands, and not fall victim to furlough’s end.


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