By Ben Willmott, Head of Public Policy
The announcement that the Government’s Job Retention Scheme is to be extended until at least the end of June is extremely welcome but leaves considerable uncertainty about what happens then.
Friday’s announcement came just the day before collective redundancy consultations would have had to be triggered in many organisations if the JRS had ended on 31 May as initially scheduled.
Employers will be extremely relieved but already considering the end of June with some trepidation given the complete uncertainty about when and how lockdown measures will be unwound and the likely state of the economy.
This ambiguity is no one’s fault; it is just the nature of the unprecedented challenge posed by Covid-19, with governments all over the world trying to navigate the crisis and find the right way to gradually unwind lockdown measures at the right time.
However, what this uncertainty does mean is that the public policy response also needs to be flexible and this includes the JRS. One feature of the UK scheme is that unlike some other wage subsidy schemes, such as the German Kurzarbeit short-time working scheme, the Job Retention Scheme does not allow furloughed staff to do any work at all for their existing employer. The UK ‘all or nothing’ furlough approach may be simpler and easier to administrate than a more flexible scheme which enables short-time working but it also has significant drawbacks and disadvantages.
Firstly, it does not allow organisations to continue to use staff on reduced hours where this is possible meaning it is much harder for employers to flex their workforce efficiently, placing more pressure on remaining non-furloughed staff who often have to work harder or in unfamiliar roles to compensate.
This is a particular challenge for micro and small firms under most financial pressure and with fewer staffing options. This is a concern that has been raised by many CIPD-qualified HR consultants who provide support to small firms. However larger employers would also benefit significantly from staff who are furloughed being able to work from reduced hours, according to conversations we have been having with senior HR directors.
Making the scheme more flexible would also potentially reduce the cost to the public finances. Many workers who might be able to work reduced hours paid for by their employer and would require a lower level of wage subsidy, are forced to be officially furloughed and so are eligible for the full minimum wage subsidy of 80% paid for by the UK Government.
The JRS as currently designed also means that large numbers of furloughed staff are stuck at home not working at all. Of course, some may choose to volunteer to support the NHS while others may be able to benefit from online training, however it is likely the majority will be left without the sense of purpose that work gives, or any opportunity to contribute to their employer, wasting time and potential.
Finally, a more flexible JRS which allowed short-time working would enable employers to bring back workers gradually, which is likely to be necessary if lock down measures are phased out over time and because demand in the economy is also likely to recover slowly.
A more flexible scheme would be extremely useful if there is a second wave of the virus and lockdown measures have to be imposed and subsequently exited from again.
One obvious obstacle to revising the Job Retention Scheme to enable short-time working is fraud, with a big question mark over how you would enforce it to ensure it was not being abused. For example, an unscrupulous employer could try to get 100% of the work from their employees, pocketing the JRS money. And if anyone asked awkward questions, it could say that any evidence of employees working was for the 60% of their time when they could work - and disproving this might be awfully difficult.
Nonetheless, now is not the time ‘to make perfect the enemy of good’. The vast majority of employers would comply with the provisions of a short-time working scheme and HMRC could conduct random spot checks to cut down on the chances of fraud and crack down retrospectively where there was abuse.
The Chancellor has said that he intends to keep the JRS under review and a longer-term decision on the JRS will need to be taken fairly soon. In a month’s time we will again be in a position where many employers may have to trigger collective redundancy consultations if the scheme does end on 30 June.
Rather than the scheme being extended on a month-by-month basis, it would make more sense to take a decision fairly soon to extend it until the end of September subject to review and make it more flexible at the same time. The UK’s flexible labour market has long been one of the country’s strengths, and the same principle applied to the JRS can help employers adapt and protect people’s jobs as we go through uncharted waters over the next months.
