The End of Furlough | What Is the Future for the Employer & Employee

I think it is safe to say that the vast majority were pleased with the introduction of the Furlough Scheme at the beginning of the Covid 19 pandemic. With the roll out, ongoing management, and subsequent extension of the scheme having been received positively. There are however many things for employers and employees to consider as this scheme evolves, and when combined with the work from home revolution I believe we could see a fundamental change to the traditional landscape of full-time permanent work. 

Present situation

We currently see ourselves in as comfortable position as you could expect considering the circumstances. Employers have held onto their employees whilst the government supports their pay, meaning they don’t have to make urgent changes, and employees are earning less but are likely to have reduced costs with for example in some instances no more commute and of course significantly lower leisure costs.

Clearly there is no problem with this for those businesses who believe their trading will go back to normal. Why would you let go and risk losing your most valuable commodity if you think there is a requirement for them in the future.

‘During a recent episode of our podcast with Jonathan Lerner, Managing Director at Smedvig Capital highlighted that the job of the government is to make the decision more difficult for businesses on a monthly or quarterly basis by pushing bosses on who they actually need and are willing to pay for.’

Moving forward

As we move towards the end of July things will become clearer on the level of contribution that employers will need to make alongside the government. We will also see if this scheme is tailored towards the industries most affected and as to whether employers can take furloughed employees back part-time.

The level of redundancies during this August – October period will depend a great deal on the percentage split between the government and the employer. If the government decides to pay 50% or 60% of the 80% figure for instance then I don’t think things will change a great deal but if the employer is expected to pay 40% + then I think we will start to see a major impact in employers decision making.

As the support is tapered away, bosses will be looking at their cashflow projections and deciding how many furloughed staff they will have to let go for good. During a recent episode of our podcast with Jonathan Lerner, Managing Director at Smedvig Capital highlighted that the job of the government is to make the decision more difficult for businesses on a monthly or quarterly basis by pushing bosses on who they actually need and are willing to pay for.

Unfortunately, the challenges will keep coming, within six months of the end of furlough, other emergency policies will also expire. The business rates holiday ends next March, deferred VAT has to be paid back from January, bank forbearance will come to a close and the one-year interest free period on the business interruption loans will almost be over.

‘For small businesses, payroll is usually their biggest single cost, so a scheme like Salary-for-shares that reduced their annual salary bill by 10% or 20% would relieve cashflow pressure, buy more time, and potentially produce a more productive, and engaged workforce.’

What are the options

So, it is clear there will be significant redundancy between now and the end of 2020 but what are the options for businesses looking to keep a hold of their most important resource whilst they ride out this challenging period.

Salary-for-shares

Where staff would take a cut in pay for shares in the business. For small businesses, payroll is usually their biggest single cost so a scheme that reduced their annual salary bill by 10% or 20% would relieve cashflow pressure, buy more time, and potentially produce a more productive, and engaged workforce.

Shared functional specialists / freelancers

Where businesses have a full time permanent employee there is the option to transition some of their hours / days into other businesses who need their skillset and are willing to share the cost. With the work from home revolution I believe Founders / CEO’s will have an increasing number of people who work for them that they have never and perhaps will never meet.  There is no reason why a BI Analyst or Salesforce Developer cannot be employed by more than one business, and with reduced travel and office costs it could be the way forward for many.

Outsourcing

Turn to outsourcing certain business functions on a predictable monthly subscription basis allowing the business to gain the functional support across marketing, HR, accounting or legal services for instance without needing to employ anyone specifically for these functions.

4 day week

A growing number of startups are adopting a four-day working week and the results of a recent trial at Microsoft suggest it could work even for the biggest businesses. The results during Microsoft’s recent rial in Japan were promising: While the amount of time spent at work was cut dramatically, productivity — measured by sales per employee — went up by almost 40% compared to the same period the previous year. Could the four-day working week result in more loyal, engaged staff and boost productivity?

Written by Andrew Waters | Zanda Co-Founder