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How have the changes to furlough impacted employers?

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How have the changes to furlough impacted employers?

There are still 1.5 million workers on furlough; and with the Coronavirus Job Retention Scheme beginning to wind-down, there are changes that impact both employers and employees. Employment Solicitor Chris Dobbs discusses.

How has the furlough scheme changed in July?

From 1st July, the furlough scheme began to wind-down and employers are now expected to pay a percentage of their furloughed workers salary.

This change to furlough could have negative ramifications for both employers and employees, due to the financial pressures now being put upon businesses nationwide. We discuss these impacts below.

How much do employers have to pay towards furlough in July?

Employers are now expected to pay 10% of furloughed employees wages; this will rise to 20% in August and September. You can read about the changes that have been made, as well as upcoming changes, in our dedicated article here.

How do the changes to furlough affect employers?

Although the winding-up of the furlough scheme is a welcome change to normality, employers of furloughed staff will be concerned as the cost of keeping employers furloughed rises.

Some employees may not be able to afford to keep their furloughed staff, especially in sectors where the return to work is dependent on the ending of COVID restrictions; which could end up being pushed back.

There is a significant concern for employers, especially those in the hospitality sector, that they must now incur additional cost for their staff with further time unable to operate fully as a business.

This evidently will also impact employees.

How do the changes to furlough affect employees?

As the economy reopens, the hope is that the majority of furloughed workers should be able to return to work; with the ending of COVID restrictions (currently scheduled for 19th July) allowing many businesses to open back up.

However, the current and continuous rise in furlough costs for employers could mean that the furloughed workers' jobs may be at risk. If employers consider the costs of maintaining furloughed staff too great, or simply can't afford it, then there could be job losses.

Will the changes to furlough result in job losses?

With the new demand for employers to pay more towards furlough, many expect an increase in redundancies. This includes the Institute for Fiscal Studies, who said:

"With the cost of keeping employees on furlough rising, we therefore expect to see rising redundancies over the summer even before the final end of the scheme" adding that, "[The winding-up of furlough] will also mean big income losses for many of those who end up unemployed unless they are swiftly able to find alternative employment."

The Resolution Foundation indicates that job loss is potentially more likely for older workers. The foundation suggests that changes to the scheme from 1st July have put 1 in 4 workers aged 55-64, who have stayed on the scheme since the previous lockdown, at risk.

A specialist Employment solicitor's view

Chris Dobbs says: "As Government support winds down for business, employers will once again find themselves forced to make difficult decisions. Where redundancies are inevitable for financial reasons, these require careful planning to avoid claims of unfairness."

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