Furlough – what next?

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The Government’s Job Retention Scheme was set up urgently to support employers and protect employees during lockdown. Such state intervention, unprecedented in the UK, is designed to facilitate a quick rebound of the economy once business activity resumes. But as the crisis drags on, the lockdown has already been extended to at least 7 May 2020, and the furlough scheme to the end of June. This makes a sudden resurgence in the economy increasingly unlikely.

Instead, it looks like lockdown will be eased progressively over a few months. The exit strategy is yet to be confirmed, but new proposals set up by UCL suggest using a traffic light system with three phases: red (slight easing of restrictions but with strict caution while risk is still high), amber (conditions improve but we still need to be careful) and green (when medical experts give the all clear).

This prolonged economic shutdown and gradual unlocking, although necessary to get the surge in coronavirus cases under control, is likely to create a U-shaped recession – characterised by a slow recovery. We can also expect a change in consumers’ behaviour after businesses reopen, whether it’s because they’re still worried or financially worse off. All of this would result in a sharp increase in unemployment or part-time working in the months to come.

We may have to wait until late 2020 or early 2021 to see growth resume, and even longer before employment recovers to pre-crisis levels. But businesses, like governments, should use this period of lower activity to think about how they can mitigate the aftereffects of this pandemic, protecting themselves and their staff.


1.     Optimising resources

If there is one silver lining to this grim crisis, it’s probably the way people and businesses pulled together. One prime example is the concept of temporary labour sharing arrangements, in which a financially distressed or under-capacity business “lends” a group of its underutilised workforce with transferable skills to another employer with a shortage of labour, for a fee plus the payroll costs for those employees.

Clearly, any transfer agreement needs to ensure that it covers off the redistribution of risks and liability for the transferred workforce. But a carefully crafted and planned transfer of labour to businesses in need of additional human resources on a temporary basis, could be an important and innovative diversification of income and effective use of a business’ most important resource: its employees.


2.    Rethinking office space

The lockdown has also demonstrated that many businesses can enable home working. These home working arrangements are likely to continue after lockdown is lifted. Video calls will soon become an established part of working life, while the need for large office space may become questionable. There may well be more requests from employees for permanent changes to working hours and place of work via flexible working requests which employers will be obliged to consider seriously.

Rather than being a daily place of work, offices might become a core hub for meetings, conferences, social gatherings, resource sharing. But whether considering downsizing or setting up a staff working from home/in the office rotation, businesses should remember that to be successful, such a reorganisation must be accompanied by new procedures and structures, including clear homeworking policies and appropriate IT policies. The potential for significant data breaches such as a theft of an employee’s laptop (containing personal data) from their home working environment needs to be considered and appropriate security and employee guidance put in place.


3.    Assessing health and safety risks

Flexible working doesn’t mean health and safety regulations are less rigid. As well as monitoring productivity and implementing data and confidentiality protections, employers owe a duty of care to ensure their employees’ health, safety and welfare “so far as is reasonably practical”.

So, although home working usually applies to low-risk office-type jobs, employers should ensure that appropriate and detailed risk assessments are conducted at the start of a homeworking arrangement and periodically thereafter.

Employers might also have to provide equipment as part of reasonable adjustments for pregnant or vulnerable people – such as arm rests and other workstation adjustments. We’re also likely to see increased regulations within office buildings (such as an obligation to supply sanitizers or masks). Employees may be more inclined to assert their views regarding appropriate safety in the workplace and could complain to an employment tribunal if they suffer any detriment after expressing their views.


4.    Planning for future waves

Until we have a vaccine, and even if we do find one soon, we can’t ignore the possibility of a second or third wave of COVID-19. So, whatever home working arrangements or additional health and safety measures businesses have implemented other the last few weeks, they should not scrap them once lockdown ends. Instead, businesses should build on these solutions to develop detailed contingency plans, which can be quickly implemented.


5.     Considering alternatives to redundancy

The Job Retention Scheme has certainly offered short and much needed respite to distressed businesses – preventing hundreds of thousands of employees being placed on lay-off or made redundant. But this support, estimated to cost the public purse many billions of pounds each month, is unaffordable in the long-term.

So, to survive the period of flat growth after the Scheme ends and before the economy picks back up, businesses should consider alternatives to redundancies. By exploring temporary arrangements, like that presented in (1), employers can secure new sources of income generation while protecting their workforce. Other options include considering career breaks, sabbaticals or a reduction in overall hours worked for some or all employees.

Either way, now is the time to plan ahead, have conversations and review your contracts.