· News

The pros and cons of the furlough scheme extension

The furlough scheme's extension to the end of September 2021 will continue supporting businesses financially struggling during the pandemic. However, HR is concerned about the mental health and decline in skills of furloughed employees.

For many in HR, particularly those in closed sectors like hospitality, the extension announced 2 March was a relief as more jobs will be able to be saved.  

However, other are concerned that the scheme is continuing to delay the inevitable, keeping employees in limbo and having a detrimental impact on both skills and wellbeing.

Moving on from Covid:

Living with Covid and the end of isolation: employers risk excluding vulnerable

What does ‘living with Covid’ mean for business?

Businesses look to tech for post-COVID transformation

People teams are now left with a decision - is it ethical to continue the furlough scheme? Or would it be better to make redundancies now and support employees with moving on in their careers?


Employees mental health could be affected 

Nicki Robson, managing director at HR firm Breedon Consulting, said the longer people are out of the workplace, the more difficulty they are likely to experience when they need to return.

Speaking to HR magazine, Robson said: “Employees mental health may suffer as a result of extended time on furlough.

“They could also face a potential loss of confidence in their own ability, and may simply forget things that they used to know.”

Robson said HR knows how difficult it is returning from a two-week holiday, let alone returning to work after more than a year.

He said: “It will be a challenging time for managers and leaders to re-onboard their teams and get employees up to speed.

“Those who have been on full time furlough are likely to have completely lost touch with what’s going on in the business and their skills will almost certainly have suffered, and those who have been on flexible furlough are likely to have grown to enjoy their time off work, and work-life balance will have taken on a whole new meaning.”

Robson warned that HR should expect to see an influx in flexible working requests.

“Particularly requests to work from home or to reduce weekly working hours, coupled with an increased focus on employee wellbeing and engagement,” he said.


HR will have more time to plan

While the extension could be delaying a surge in unemployment, HR have been provided with more time to plan for making challenging people decisions and business re-structures.

Jeya Thiruchelvam, managing editor, employment law at XpertHR, told HR magazine the furlough extension will give businesses some financial breathing space while lockdown restrictions remain in place.

She said: “It should help prevent businesses making employees redundant simply because they can’t pay the wage bill while they’re experiencing reduced demand or not operating.

“In a few months, employers will have a clearer picture of the impact of the pandemic on their business model, and the implications and consequences for their workforce.”

Thiruchelvam also said the extension will stop businesses making rash decisions during lockdown.  

“It will give businesses a chance to conduct crucial analysis before making redundancies for short-term cash-flow reasons,” she reasoned.


It could risk a decline in skills growth 

Critics of the furlough scheme have said the extension has stunted employee’s ability to progress their skills and have called for furloughed employees to be re-skilled when they return to work.

Speaking to HR magazine, Sheila Flavell, chief operating officer, FDM Group said while the extension will provide much needed financial support for struggling businesses, HR must think about the lack of skills growth furloughed employees have had over the past year.  

“We must consider and actively aid those workers who have been placed on furlough for an extended period of time, whose declining skillsets has grown into a major concern,” she said.

Flavell said business leaders must not neglect those still on furlough and offer continued support to them throughout the remainder of the furlough scheme.

She said: “Business leaders can use this down time productively by supporting upskilling, retraining and other learning initiatives, equipping staff with the skills needed to climb the corporate ladder, or branch out into new career paths upon their return to work.

“Training and support will also be key in allowing businesses to build back better and drive a major economic recovery once lockdown is eased and society returns to normal.”


The return to work may be eased  

Musab Hemsi, partner at specialist HR and employment lawyers LexLeyton, said the extension could bridge the gap between the end of the furlough scheme and the return to work.

Speaking to HR magazine, he said: “Businesses will be hoping to open as soon as possible to start generating revenue that will counteract their increasing overheads and tax commitments as the scheme draws closer to its end.

“So, employers will need to prepare for the end of the furlough scheme in good time, particularly bearing in mind the statutory time periods for collective consultation in the event of large-scale redundancies.”

Hemsi said he hoped when the scheme begins to wind down, there is a continuation and extension of flexibility that the scheme provided employees.

“In particular, the introduction of the possibility of furlough to include individuals working their notice would be a significant benefit to employers, as so many workers are moving jobs at the moment.

“Flexibility is essential to help businesses plan their own recovery.”