Furlough Extended What does this mean?

May 13, 2020

You’ll have heard the headlines, perhaps you even listened live, the UK’s furlough scheme has been extended by 4 months. Chancellor Rishi Sunak has confirmed that employees will have 80% of their wages paid by the government, up to £2,500, until October. The caveat here is that he will request business to share some of this cost come August. It’s unclear what this might eventually entail, but it appears to mean that furloughed employees may be able to return to work on a part-time basis.

This is very good news, I’ve said for a while that the all or nothing approach has meant that some people were furloughed who could be partly productive. The knock on effect here is that some business who might have been able to operate at a reduced rate are instead not operating at all. Some business have less work, but still some. Allowing staff to do a few days a week, with the government covering the rest is a much better option.

The one thing I do worry about is the timescale of this scheme. I’m worried that the 7 months total period is very long and some people will come to rely on it. It’s possible that it will become difficult to get people to return to work. for employees it’s a no-brainer to receive nearly full pay, while doing no work at all. The problem here is that this can’t last forever, and at some point we’ve got to get the economy moving again.

Time will tell how this develops. Do you agree with my views?

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