S POT L IGHT
The dilemma of furlough
In May, the Treasury announced that its multibillion-pound Job Protection
Scheme would be extended until October. The news was met with relief by
thousands of businesses around the country – but as Insight Data’s Jade
Greenhow explains, many questions still remain.
Today, the wages of 8 million private
sector workers are being paid by the
government, as part of the greatest state
intervention in the economy since the
Second World War.
Chancellor, Rishi Sunak, ripped up the fiscal
rule book when he launched the initiative back in
March, which pays 8% of furloughed workers’
wages, up to a maximum of £, per month.
But given the scale of the challenge posed to all
sectors of the economy by the ongoing pandemic,
it wasn’t surprising when he announced he was
extending it well into the Autumn.
That could result in a total price tag approaching
£100bn – an almost unimaginable figure.
But while the cost will be enormous, with the
country facing recession (albeit one economists
hope will be relatively short-lived), very few would
argue that the intervention isn’t urgently needed.
% IN FURLOUGH
Figures gathered by The Glazing Summit, a
collaboration between ourselves and Purplex
Marketing, indicate that 6% of companies in our
sector furloughed more than three-quarters of their
workforce during the lockdown, while over %
had made use of the scheme in some capacity.
Separately, several big name construction
companies also announced they’d be using the
scheme – BAM furloughed employees,
Multiplex furloughed , while Mace and
Willmott Dixon both furloughed 8.
But now the strictest phase of the lockdown has
been lifted, following a mid-May announcement by
the Prime Minister, Boris Johnson.
The official advice is that if it’s possible for
employees to work from home, they should
continue to do so – but that workers in sectors
where that’s not feasible should now return to
their factories and warehouses. That obviously
includes fenestration and construction – and now
thousands of business owners in our industry find
themselves facing a dilemma.
WHAT HAPPENS NEXT?
Businesses want to get up and running again –
which requires un-furloughing workers who’ve
previously been paid using the Job Protection
But at the moment, the state of the market isn’t
clear. How much demand will there be? And will it
be enough to pay the wages?
Deciding how much of the workforce to take
off the scheme will therefore have to be a careful
balancing act. Companies will want to un-furlough
enough staff to cope – especially if they have
to deal with a lot of pent-up demand from the
lockdown months – but not so many that they’re
left struggling to pay the bills if the market is still
To some extent, the decision will be partly made
for them – social distancing means businesses
physically won’t be able to accommodate the same
number of people they had on site before the crisis,
which will put an upper ceiling on the amount of
workers they can bring back.
But still, in the weeks ahead, I imagine thousands
of companies will be thinking very hard about how
they can get that balance right.
MORE FLEXIBILITY TO COME
From July, the furlough scheme will start to change.
From July, employers will be able to furlough
workers on a part-time basis – meaning they can
work a number of days a week, while still being
furloughed the rest of the time. Their employer will
have to pay them as normal for any hours worked.
From August, employers will restart national
insurance and pension contributions – something
the government suggests will represent around %
of a company’s pre-coronavirus staff costs.
In September, the government will pay %
of furloughed workers’ wages up to a cap of
£,8., with employers expected to pay the
remaining %, to ensure staff still receive 8% of
Then, finally, in October, the government will
pay 6%, up to a cap of £,8, with employers
asked to contribute %. By November, the
scheme will have closed.
ONLY TIME WILL TELL
The introduction of part-time furloughing is a very
significant step. It will help companies get back on
their feet by giving them access to their workforce
when they need it, without handing back the full
burden of their payroll before they’ve got enough
business to pay for it.
However, questions still remain. By September
and October, will the market have recovered
enough for businesses to meet those increased
costs? Or will that leave them facing another
financial headache? Only time will tell.
* All information correct at the time of