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COVID-19 Job Retention Scheme - Is It Enough?

COVID-19 Job Retention Scheme - Is It Enough?
31 March 2020 | Updated 02 April 2020
 

As the government supports businesses and their furloughed workers through the COVID-19 Job Retention scheme, how will this affect UK productivity over the long term?

 

New annual leave legislation

 

On Friday 27 March, it was revealed that annual leave not taken due to the Coronavirus pandemic, can be carried over into the next two years. The Department for Business, Energy and Industrial Strategy said that employers who do not allow their workers to roll holiday over will face fines. Employees will be able to roll over up to four weeks of holiday.

Last week, Martin Port, founder and CEO of BigChange, called for the government to consider the limitations of COVID-19 Job Retention Scheme, including the problem of annual leave. Today, we publish Port’s letter to Chancellor of the Exchequer Rishi Sunak in full, as well as an update in light of this new holiday allowance legislation

Port has been a leader and innovator in the telematics and mobile software industry since 1998. He was the 2008 EY Entrepreneur of the Year for Technology and Communications and was a finalist in the 2011 IoD Director of the Year awards.

 

Martin Port’s letter to the government

 

 

“The ‘furloughed worker’ scheme potentially leaves hundreds of thousands of people sitting at home doing nothing. I believe this is terrible for mental health and morale. We cope far better when we are busy and have purpose.”

–Martin Port

CEO, BigChange

Dear Rishi Sunak,

At present, your job retention scheme promises to pay up to 80% of the wages of “furloughed workers” through a government grant. Under these rules, furloughed workers must not undertake any activities for their employer, and the company can then claim back up to £2,500 per staff member.

I understand that this means many workers who would otherwise be laid off can remain on the payroll for the foreseeable future. This move is to be applauded.

However, I would like you to consider adding a second option to the job retention scheme, paying £1,000 per retained worker that is kept in employment.

My company, BigChange, now employs 170 people. We want to think beyond the short-term and be ready for the upturn at the end of this crisis.

We are a virtual company, meaning that everyone can work from home if required. I feel that companies like mine are being encouraged to furlough workers, in order to cut costs, rather than being encouraged to trade through this difficult time.

Business owners who don’t want to go down to a skeleton crew are effectively being financially penalised.

If there were a second option, which paid £1,000 per worker, companies would not only be incentivised to keep all their staff, they would also be encouraged to keep trading, minimising the impact on the economy in the long-term.

The "furloughed worker" scheme potentially leaves hundreds of thousands of people sitting at home doing nothing. I believe this is terrible for mental health and morale. We cope far better when we are busy and have purpose.

I fear for young people, especially those in isolation right now, who may just stare at their mobile phones all day.

The current job retention scheme also makes no provision for new starters, who may have accepted a job offer and given notice at their previous company and are now in limbo. Almost 1 in 10 UK workers will change job each year, according to the Office for National Statistics, which means that as many as 200,000 people are currently between jobs, facing an uncertain future.

What will happen to holiday allowances? Presumably furloughed workers will still be entitled to paid holiday, which could mean many companies are stuck later in the year, when these workers all try to take vacation at once.

The finer details of this scheme, such as how and when companies will be able to claim, have yet to be published. While it is still in the early stages, please consider adding this second option. Think of the businesses that would be better off not furloughing anyone, and trading virtually at this time, albeit in a very difficult trading environment.

Business and the economy is not the priority. Saving lives and protecting the vulnerable and elderly are the most important things to focus on right now. But we will come out of the other side of this crisis one day. The majority of people should come through this and they will need jobs when it’s over.

 

Update – the issue of holidays

 

I posted the above letter to Rishi Sunak about his COVID-19 job retention scheme on LinkedIn. I praised the intention behind his support for businesses and their furloughed workers but raised some issues around how the scheme would affect UK productivity over the long-term. 

Perhaps the Chancellor reads my blog because he has resolved one key query over the problem of workers' annual leave. I posted that when we all return to "business as normal", as I hope we will later in the year, millions of staff across the nation will then need to take their holiday or risk losing it, delaying our economic recovery even longer. 

The Department for Business has just announced that the government is amending regulations to allow annual leave to be carried over into the next two years to prevent this from happening. This is a major win for businesses. I only hope that Mr Sunak will also act on some of my other points in due course

Picture: As the government supports businesses and their furloughed workers through the COVID-19 Job Retention scheme, how will this affect UK productivity over the long term?

Article written by Martin Port | Published 31 March 2020

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