Act now to avoid making redundancies
The furlough scheme has been a lifesaver for many people—and their employers.
Diane Hall
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Faced with fewer sales, or no sales at all, more businesses would have folded if they’d been required to pay their employees as well as their priority bills during lockdown.
Earlier in the pandemic, the government introduced a raft of supportive measures…which included pausing business rates, offering loans to keep companies afloat, and a commitment to pay staff, as the pandemic raged on.
These measures were always intended be finite. The country does not have a bottomless money pit, and paying billions of pounds out, in order that people could afford to meet their bills and feed their families whilst remaining at home, is not something that could continue forever. The furlough scheme, therefore, is to be wound up at the end of October 2020. Now that most industries have returned to ‘normal’ and we are allowed out of our homes to both work and contribute to the economy again, it’s perhaps not as necessary as it was back in March.
That’s not to say, however, that every business is back on an even keel. For some industries, social distancing regulations are still having an impact on revenue and it may be months before their turnover echoes that of previous years. Once the furlough scheme ends, these businesses will have the added burden of paying their staff’s wages again or laying them off altogether.
Of course, the latter is not what the government wants. The number of redundancies during 2020 has already hit an unenviable high. More people out of work means fewer people spending money; if the economy shrinks, prices go up to compensate or even more people lose their jobs—it’s a downwards spiral.
The government is encouraging businesses to grit their teeth and keep their employees in work. They have promised employers a bonus of £1,000 for every furloughed employee they bring back to work and who remain in employment until January 2021 at least. It’s a great incentive, but once this bonus has been paid out—from February 2021—what then? Will it be chucking out time for these poor workers?
Financial experts recommend early intervention as the answer. If the scenario described above is a very real one to you, seeking help now could save your business; whereas taking the ‘let’s see what happens’ approach could lead to insolvency.
It’s perhaps heartening that the number of businesses that became insolvent during the second quarter of 2020 is actually less than the same period in 2019. ‘This is due to support measures,’ says Eleanor Temple, the chair of trade body R3. She adds, ‘I would urge anyone who is concerned about the future of their business to seek qualified advice as early as possible, so that they retain access to the widest range of options for safeguarding its future and the jobs it sustains.’
On the government’s own website, it warns business owners against taking rash decisions without seeking advice. It states, ‘If you do not consult employees in a redundancy situation, any redundancies you make will almost certainly be unfair and you could be taken to an employment tribunal. You must follow ‘collective consultation’ rules if you’re making 20 or more employees redundant within any 90-day period at a single establishment.’
Eat Out to Help Out was a scheme that reduced British clients' bill at restaurants, cafes and pubs with 50% in August 2020
The ‘Eat Out To Help Out’ scheme was launched to encourage business owners in the hospitality industry to bring back their employees from furlough, as the government consciously tries to stem the flow of workers to the dole queue. There’s hope that further initiatives will not just encourage businesses to hold on to their staff, but also the general public to keep on spending—and in doing so, turn the downwards cycle into an upwards one.
The recession that was feared, as a result of all the money paid out by the Treasury in furlough payments, business loans and other schemes, may not last as long as was initially forecast at the outset of the pandemic, which is good news. It’s difficult to know how the 2020 recession will fare overall, but whilst it may seem like there’s a deep decline in the economy, know that severe recessions tend to have shorter recoveries. Economic declines that don’t have the same severity actually take longer to come back from.
The thought that we may have to resort to a second, third or fourth total lockdown to survive coronavirus is a scary one. The measures we have already taken have been drastic enough…it’s difficult to know how our economy could survive a repeat performance. However, to be forewarned is to be forearmed, so they say. Gathering as much advice as you can, if your business has not been able to heal from the wounds the lockdown inflicted, will stand you in much better stead if there’s still more to come.
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