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In March 2021 the Chancellor announced that the furlough scheme will end as September draws to a close, but what happens when furlough ends?

For the last year, furlough has enabled employers to retain their staff and avoid making people redundant, but with nearly five million people relying on the scheme at the end of January 2021, the end of furlough spells an uncertain future for millions of workers and businesses in and around the UK.

If you are one of the millions of people wondering what might happen when the scheme comes to an end, be it from an employer or an employee point of view, there are a few likely outcomes.

When does furlough end?

The furlough scheme is due to end on Thursday, 30 September 2021.

What happens when the furlough scheme ends?

There are three options for employers when furlough ends:

  • Bring employees off furlough and back working full-time hours
  • Bring employees off furlough and back working reduced part-time hours
  • Make unviable employees redundant

The goal for every business is to bring back their employees on a full-time basis, and where this is not possible, bring them back part-time at the very least.

Bringing employees back full-time

For businesses looking to bring their staff back full-time, there will be a range of factors that need to be considered. First of all, they will need to be realistic about whether or not their employees' jobs are viable. Sectors like the hospitality industry and retail industry are likely to bounce back quickly as people eagerly book tables at restaurants and enjoy the freedom of shopping, making most jobs in these sectors viable.

Unfortunately, not every industry will react like this, with those working in the gig economy like events and exhibitions likely to require more time to bounce back. This means not all the jobs in this sector will be viable after furlough ends. For businesses, this means taking the time to think about whether or not they can realistically afford to keep an employee on. In addition to if they can, is there enough work for them to do?

Bringing employees back part-time

For those who cannot afford to bring their staff back full-time, but who might be able to find enough work for them for a few days a week, bringing employees back on a part-time basis is an option. Whilst not ideal, for many a pay cut is better than redundancy, so it’s likely this will be a common route that employers go down until the economy completely recovers and business returns to normal.

Job sharing could be something employers choose, whereby two or more people share the same job so that everyone gets an income and no one loses their job. This will involve a pay review, but as mentioned, for businesses who are desperate to retain their staff, bringing them back part-time is the second-best option when furlough ends.

Making employees redundant 

Unfortunately, not everyone will be able to return to work when furlough ends – not even on a part-time basis. In this instance, the options are unpaid leave or – more likely – redundancy. Between September and December 2020, the redundancy rate was 12.3 people per 1,000 employees. It is likely this will increase following the end of furlough. This is no doubt the worst-case scenario for employers and employees alike, but in industries where recovery is likely to be slower, it could be the only option for the survival of businesses.

Preparing for the end of the furlough scheme

Whatever the final result of the furlough scheme is, it is crucial for both employees and employers to prepare. For employees, this could mean applying for jobs at financially stable companies (though the unemployment rate currently far exceeds the number of vacancies), or saving money where possible to cover essential bills should the worst happen. If a return to work is likely, getting back into a working routine will help employees settle back in more easily.

For employers, now is the time to be thinking about what is likely to happen over the next few months. Will the business break-even or even cut a profit prior to September, or is it more likely to remain stagnant for a period of time after furlough ends? Are there areas where money can be saved to accommodate bringing back employees who were previously on furlough? Exploring Paydata’s pay review and analysis service is a good first step for businesses looking to prepare for the end of furlough.

Get in touch

Find out more about how Paydata can help you prepare for the end of September. Contact us or speak to an expert on 01733 391 377.

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