Six months ago, most people in the UK would have no idea what “Furlough Leave” was. Since the UK Government introduced a Job Retention Scheme in response to the COVID19 novel coronavirus pandemic, being “on Furlough” has become a commonly-used term.
The idea is that, whilst businesses are experiencing reduced or even no revenue as a result of the restrictions put in place to manage the response to the pandemic, the Government will step in and pay a proportion of an employee’s wages/salary, within limits.
It’s up to the employer whether they will make up the difference between the Government allowances and normal income but the principle is simple:
Even a profitable and otherwise sustainable business can be destroyed by a reduction in cash flow. By making use of grants to subsidise wage/salary costs, businesses can keep cash in the business and avoid redundancy or even complete failure.
Placing staff on Furlough Leave doesn’t mean that redundancies won’t be required later, or that a business will not eventually fail, but the intention is to avoid otherwise healthy businesses from being wiped out whilst their trade is adversely affected by the pandemic response – for example through enforced closure or though non-payment of invoices by others who are forced to close.
For a business, taking advantage of Furlough payments is not so different to an employee taking a payment holiday on a mortgage. If you think that you may fall on hard times later, why would you not take advantage of financial support? It may cost more in interest payments but, if that 3 months’ mortgage payment is in the bank, that’s an opportunity to keep paying the bills if you do find you need to look for another job. Similarly, if the Job Retention Scheme means that a business sustains its cash flow, then it’s served its purpose.
The trouble with this system is that there will be some fundamentally unsound businesses that are propped up for a few weeks or months before failing anyway. Similarly, there will be business owners who will take advantage of the situation and simply rely on the government to pay their staff costs for as long as they can (one observation I made in the town where I live was that major brands stayed closed for longer than independents, who found different ways to offer their services during “lockdown”). Unfortunately, the system is not perfect and these are some of the side-effects. They are also the reason that a number of changes were made from July 2020, to try and wean companies off the scheme and back onto a solid footing, in preparation for the eventual closure of the Job Retention Scheme.
The impact of Furlough on staff (including managers)
Furlough impacts staff in different ways:
- Some may feel aggrieved that they were not “chosen” for Furlough Leave.
- Some may see those “on Furlough” as getting “a free paid holiday” whilst they have extra work to do.
- Some may feel anxious that, by being placed on Furlough Leave, their job is at risk.
- Some may experience challenges as a result of not being “at work” – and the impact this has on them as they deal with the hole left in their day.
- I’ve even heard (anecdotally) of people experiencing financial difficulties as their credit risk is affected by the presence of Furlough payments on their payslips.
It’s no secret that my employer used the Job Retention Scheme. In a company blog post about putting people first, Charlotte May referred to “a number of individuals on furlough and the entire organisation pulling together to enable us to get to [the] other side of this safely”. That means that I have some experience of Furlough, both as a manager and as an employee.
Without compromising confidentiality, I can say that we had criteria for determining who would/would not be placed on Furlough and those criteria were applied without favouritism. That’s part of the reason I was Furloughed for a few weeks – the criteria used were just as applicable to me as a part-time manager, part-time Architect as they were to any other Consultant. I had to put myself on the list.
I can also tell you that Furlough is no holiday. Staff are allowed to take part in training and development activities whilst on Furlough Leave. I was only too aware that this represented an opportunity – there was no point wasting it and then asking for time to study for exams or to attend an event later in the year – so I made the most of my enforced time away from my normal work. Publicly, it was a fantastic development opportunity. Privately, I still struggled.
You see, whilst on Furlough, staff are also allowed to be in contact with their line manager. But they can’t do anything that provides a service to the company. That meant that whilst I was on Furlough Leave, I couldn’t manage my team (colleagues did that for me) or do any other internal work. There were times when I knew something was happening that I could help to influence/resolve but I was simply not allowed to. And there were times when I was asked to do something and I had to say “no”.
I was also uncertain about my future. I knew that the use of Furlough was a prudent measure for all the reasons I mentioned above but no-one can take anything for granted as the UK enters recession, maybe even depression.
Apparently, I wasn’t much fun to live with either. My family were glad to see me go back to work. It seems that I don’t do “not working” very well. Actually, I do, when I’m on a proper day off – but I struggled with the “not being allowed to work when there are things to be done” (as mentioned above).
When I returned to work, I was desperate to bring back team members who had been out of the workplace for several weeks/months. They have skills that we need, they can contribute as part of a team but I need to be sure I can keep them busy too. Thankfully, the introduction of part-time Furlough Leave helped there.
What does this mean?
The UK’s Job Retention Scheme cannot continue indefinitely. As a country, the costs are huge and I’m increasingly of the view that we should be looking towards some form of Universal Basic Income to support individuals, rather than propping up businesses (but that’s a whole topic of its own).
So, the next time you hear that “all those people on Furlough are just having a free holiday”, maybe think a bit more about the effect it’s having on their lives, the lives of those around them, and their future employment prospects.
COVID19 will have lasting effects – not just on people’s health – but on the way that we work, shop and play and what that means for our future economy and society at large.
Those most affected may not be knowledge workers like me but the many retail staff displaced as businesses that had been limping along as they failed to transform finally fold. Then, as offices become undesirable (and some may say unnecessary) there’s a whole section of the economy that relies on office workers spending money in town and city centres every day. I’d like to think that those empty offices can be converted to apartments, helping to address the housing crisis. That will bring people back into cities and new businesses will grow and thrive. But that will take time. Years, maybe.