Furlough scheme should be extended ahead of the Budget, says CIPD

furloughWith six weeks still to go until the Chancellor’s Budget, the CIPD is urging the Government to act early to extend the furlough scheme to protect jobs, support incomes and enhance skills development. Its calls are outlined in a report called The Future of Furlough – Recommendations for now and for any future wage subsidy. In order to support smaller firms who don’t pay an apprenticeship levy, the CIPD is also recommending the creation of a furlough scheme training fund of up to £100 million, which would be funded from levy-paying firms’ expired levy funds that would otherwise go to HM Treasury. The CIPD estimates that this could pay for training or outplacement skills development support for nearly 160,000 workers in small firms.

The CIPD is calling for Government to:

  1. Extend the furlough scheme to the end of June 20201 and announce that decision well in advance, and certainly ahead of the March Budget, to give businesses a long-term picture of support so they can plan effectively and not risk jobs unnecessarily. The CIPD first wrote to the Chancellor in December 2020 to set out its recommendation for extending the furlough scheme.
  2. Retain the Government subsidy at 80% to the end of April, reducing to 70% in May and June.
  3. Introduce a lower limit to the furlough scheme, set at the National Minimum Wage, to ensure no incomes dip below this level. This is important as those that are on the lowest rates of pay are least likely to have their furlough pay topped up by their employer.
  4. Link the furlough scheme to support to enable firms to train staff who are fully furloughed or working reduced hours and to provide funded outplacement skills development support to any worker made redundant. This support could be provided by allowing employers in England using the furlough scheme to use their apprenticeship levy funding for other forms of accredited training and skills development, as well as apprenticeships.

Jonathan Boys, author of the report and labour market analyst for the CIPD comments: “The furlough scheme has been a lifeline for thousands of organisations, helping to protect jobs and keep businesses afloat. However, this latest wave of the pandemic shows that UK PLC won’t be operating as business as usual for many months yet, and that businesses need urgent help. Businesses need certainty now on what support will be available to them in the months ahead. Our survey shows that many want the furlough scheme to extend beyond April, but the Chancellor has said that this won’t be reviewed until March at the earliest. Businesses cannot wait that long for certainty, they need a clear indication of Government support to June at least and they need to know this in good time.

“To delay this decision unnecessarily risks losing viable jobs and increasing redundancy costs for employers, which can amount to thousands of pounds. Adding these costs to new hiring costs when businesses do open up again could prove to be a significant outlay for businesses that few will be able to afford. An early decision on extending the furlough scheme will give employers the certainty they need to make the right call for their business and their employees.”

According to the CIPD’s summer 2020 Labour Market Outlook report, the average cost of a redundancy is £11,125. In December 2020 the Office for National Statistics reported that latest redundancy figures had increased by a record 217,000 on the quarter to reach a record high of 370,000 representing a significant cost to UK businesses.