The success of the furlough scheme—and the fear of what comes next

So, Rishi Sunak has been generous yet again. The unprecedented Coronavirus Job Retention Scheme (CJRS, usually known as the furlough scheme) will continue until October this year, albeit on a gradually reducing basis. Employees on furlough will be permitted to work part time. From 1st August, employers will have to pay employees’ national insurance and pension contributions.

From 1st September, the government will only reimburse 70 per cent of salary (up to a maximum of £2,190). Employers will be required to top-up to 80 per cent. After 1st October, the reimbursement will be 60 per cent of salary (up to a maximum of £1,875).

The scheme will close altogether on 31st October 2020. No one can go on the scheme during those latter months who has not been furloughed by 10th June.

We still await the Treasury Direction and the Employer's Guidance to see the details. But there are some things we can say with certainty about the performance of the scheme so far and the problems that might follow its withdrawal.

What is clear is that the chancellor has avoided the lure of sectoral schemes or regional variants. The cost so far (according to the Office for Budget Responsibility)has been about £63bn for this and the self-employed scheme. This will have to be clawed back, presumably in higher taxes. The Job Retention Scheme has been a mixture of employment and social security and savours of the universal basic income which is anathema to Tory ideology. It can be counted a success; the scheme was rolled out quickly; indeed until March the word furlough was not even in most of our vocabularies. The only category of people not entitled to support of any kind are those who pay themselves with dividends.

There has clearly been some fraud on the furlough scheme, with many tales of employers who take the cash actually requiring employees still to work. It has however been efficiently operated, with HMRC providing a fast turnaround of applications.

Interesting work led by Abi Adams Prassl of Oxford University has found a major gender impact on joblessness. Even after controlling for variables, women in the UK were still 15 per cent more likely to have lost their job and 8 per cent more likely to have been furloughed.

Of course, the scheme may be simply postponing the evil day of massive job losses. Over time the burden will be transferred from employment costs to universal credit, which has already seen a large rise in claimants.

Employers will soon start the mandatory 45-day consultation over redundancies of 100 or more employees and 30 days for smaller redundancies. Whilst the emergency of the pandemic might have provided a defence to employers for not adhering to this minimum period, the existence of the furlough scheme means that it will be difficult to argue that it is not reasonably practicable for them to consult unions, staff reps or employees. Large sums may be awarded by employment tribunals as protective awards if these duties are not carried out and there may be unfair dismissal claims on top.

John Stuart Mill in his 1873 Autobiography observed that “no great improvements in the lot of mankind are possible until a great change takes place in the fundamental constitution of their modes of thought.” This epidemic may be one of those unusual periods where our thoughts about work fundamentally change and may have an impact on the employment landscape for decades, although precisely what this will be is at present less clear.

One possibility is that unions emerge stronger than they have been for the last decade. They are an integral part of the return to work, including to proper schooling. Employees will feel they need a collective voice and support in such tough times, not least in resisting redundancies or requirements to work in unsafe conditions without protective equipment. Although the ideology of many employers calls for individual contact with workers, when it comes to it they often prefer to talk to the collective body. If this were a One Nation Government (and the jury is out on that one) it might introduce some modern version of the National Economic Development Council, which was part of the Macmillan government’s economic planning, to provide a forum for employers and unions to work together in the national interest.

What are the measures that should be introduced if a more caring and considerate mood breaks out post-epidemic? The government is thinking of introducing some form of right to work from home. This needs to be balanced by some inspectorate to ensure safe standards and that there are not breaches of working time provisions.

Redundancy pay is quite low in this country and the statutory maximum is ripe for a hike. The Matthew Taylor report on the gig economy has in large part gathered dust since it was delivered to the May government; greater protection should be given to what is often termed the precariat, for example the uber and delivery drivers who have played a positive role in the crisis. Employees too often lose considerable parts of their rights in the wreck of a liquidated company (even when these rise as a phoenix from the ashes) and this should be tightened up. The employment tribunal system dealt with relatively few cases whilst high fees had to be paid on each claim but is now overwhelmed and needs a major cash injection. It has not reacted well during the pandemic, with few hearings being held.

The furlough scheme has been a rare success for a government mired in controversy about PPE, testing and the lateness of introducing lockdown. We will probably all be paying back for a long time but it has been good while it lasted. More scary is what happens next.

 

John Bowers QC is Principal of Brasenose College, Oxford and an employment and human rights barrister. His latest book is on the law of whistleblowing