{"id":8064,"date":"2020-08-17T19:10:35","date_gmt":"2020-08-17T18:10:35","guid":{"rendered":"http:\/\/www.markwilson.co.uk\/blog\/?p=8064"},"modified":"2020-08-18T13:34:53","modified_gmt":"2020-08-18T12:34:53","slug":"furlough-is-no-holiday","status":"publish","type":"post","link":"https:\/\/www.markwilson.co.uk\/blog\/2020\/08\/furlough-is-no-holiday.htm","title":{"rendered":"Furlough is no holiday"},"content":{"rendered":"\n

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<\/a>, being “on Furlough” has become a commonly-used term.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

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:<\/p>\n\n\n\n

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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.<\/em><\/p>\n<\/div><\/div>\n\n\n\n

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.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

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. <\/p>\n\n\n\n

The impact of Furlough on staff (including managers)<\/h3>\n\n\n\n

Furlough impacts staff in different ways:<\/p>\n\n\n\n