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Archive for June 4, 2020

Do businesses make staff redundant now or delay using furlough money until October?

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The Financial Measures that the Government implemented as a follow up to the Lockdown are a piecemeal response to a universal problem.

Even now, organisations such as Forgotten Ltd are fighting to highlight for a response from the Treasury over the lack of provision for Directors of Ltd Companies forced to stop or severely reduce trading, losing their incomes as a result.

They are not alone. There are many people already suffering in silence from the impact of the Lockdown.

As the so-called help from the Government is reduced and then stopped, there are going to be many more.

Of the businesses able to apply for ‘furlough money’ under the Job Retention Scheme, many jumped in as quickly as they could, knowing only too well that if their turnover ceased or was severely reduced, it would be the jobs of employees that would be out of the door first.

In principle, the Scheme well for companies employing significant numbers of staff who are paid around the average wage. Or at least that’s how it seemed before the realities of what the Government has created with the Lockdown began to actually sink in.

What is not being reported in the media yet, is that all sorts of unforeseen consequences are beginning to unfold for business.

One business I am aware of that employs around 750 people has began to end furlough, re-starting around 200 of their most qualified and experienced staff. They have already concluded they are achieving 40-50% of normal productivity and turnover with just 25% of the workforce and they are now re-evaluating their business model, even before the coming recession begins to kick-in.

However, the wider marketplace has changed overnight. Jobs that were needed and even considered critical until March no longer exist on the whiteboards in the boardrooms. But because the Government is paying the wages – or the biggest part of them, they will technically exist until October. That is unless Business Owners, Directors and Managers turn away the ‘free money’ that the Government is providing for those staff until and bring forward mass redundancies now.

At first glance, it is easy to conclude that if a job no longer exists and the Company knows this, they should make those staff redundant now and stop claiming the money from the Government.

But life is seldom as straightforward as it looks at first glance. We must be careful over how and where the answer to what is fundamentally a question of morality, wholly dependent and conditional upon where our own perspective lies.

With the Spectator Magazine, the dilemma that is at work was put into full force yesterday when Chairman Andrew Neil announced that they had done much better through the Lockdown than expected and had decided to give all their Government Furlough Money back.

Kudos to the Spectator as far as the fortune of their current position goes. But an elaborate form of virtue signalling like this – no matter how genuine the reasoning might have been, in itself helps no-one. Simply, because for too many other businesses, the decision they make over the money they claim and pass on to people who are currently on their books have real-life outcomes involved.

Yes, it is Public money that the Government is handing out. But the Government created the Lockdown in the first place.

No, an employer shouldn’t claim money from the Government that it doesn’t have to spend. But they are doing nothing legally wrong and after October, the many thousands if not millions of people living on furlough money today, may find themselves beginning many years without jobs.

What is very clear is the Government has entered a minefield of its own making where it could and should have made the effort to really think these things through.

A universal problem requires a universal solution.

We should have been given a a simple one, rather than the complicated one that we have got.

Nobody should be falling through the gaps in provision. Nobody should be made to feel wrong or guilty for taking any or all of the help that has been offered when they didn’t choose to stop trading.

Taking whatever is on offer is all that they – and many of their employees – have still got.

 

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