Call to Extend Furlough

CIPD calls on Chancellor to extend to the end of June to protect jobs

Peter Cheese, chief executive of the CIPD, the professional body for HR and people development, has today written to the Chancellor of the Exchequer to make three crucial recommendations to protect jobs as the Covid-19 crisis continues. These are based on consultation with HR leaders in the UK who have been on the frontline of workplace decision-making in the pandemic.

The CIPD is calling for:

  1. First, for the Government to extend the scheme beyond 31 March to the end of June to help businesses plan and to continue to protect jobs against a very uncertain backdrop through the first half of the year.
  2. Second, for the level of wage subsidy to remain at 80% for February and March given the vaccine roll-out programme will still be in its infancy and the trajectory of the virus uncertain over the next few months – it should then reduce to 70% in April and then remain at 60% for May and June 2021.
  3. Third, for the next phase of the Job Retention Scheme to not just protect jobs, but create support to enable firms to train staff who are fully furloughed or working reduced hours and in particular, to provide funded outplacement skills development to any worker made redundant.

Further to the full letter (below), Peter Cheese, CIPD chief executive, comments:

“It is crucial that Government sets out a long-term plan to protect jobs beyond March, to help businesses plan with confidence and minimise the need to make more redundancies against an uncertain backdrop through spring and early summer.

“Extending the Job Retention Scheme to the end of June will give businesses the certainty they need to protect jobs while the vaccine is being rolled out. In addition, linking the scheme to support for training will help upskill or retrain staff in sectors that have been particularly hard hit by the pandemic, and provide skills development help for workers who are made redundant over the period.

“The Government will of course be concerned about the cost of extending furlough beyond March, but its calculations must take full account of the costs of not doing so. These include a significant increase in the number of people claiming Universal Credit, and reduced confidence and spending power in the economy at a time when both have never been needed more.

“Jobs that are lost over this period are also likely to feed into long-term unemployment as recruitment and onboarding costs will mean cash-strapped employers will hesitate to hire permanent staff again until they are certain about the strength of the economy.

“If we are to achieve economic and jobs recovery in the second half of next year, the Government must raise its ambition on job protection and investment in skills.”

The CIPD’s letter to the Chancellor:

Dear Chancellor,

I would like to commend the Government on its decision to extend the Coronavirus Job Retention Scheme (CJRS) until the end of March 2021 and raise the wage subsidy level to 80% until at least the end of January.

This action has been welcomed by our members and will undoubtedly save tens of thousands of jobs in businesses whose activities have had to be restricted again as a result of the pandemic’s second wave.

However, ahead of the January review of the CJRS, I am writing to make the case, first for the level of wage subsidy to remain at 80% for February and March given the vaccine roll-out programme will still be in its infancy and the trajectory of the virus uncertain over the next few months. This will provide certainty and reassurance for firms, particularly those that are under tier 3 restrictions, or if businesses have to survive another full lockdown, where restrictions are necessarily tighter.

Secondly, I would advise the Government to set out a longer-term plan for the future of the scheme beyond March to help businesses plan and to continue to protect jobs against a very uncertain backdrop through spring and early summer.

We have been consulting with HR leaders, particularly from those in sectors hardest hit by Covid-19, to understand what support for jobs will be required. The message that has come back strongly is that an extension beyond March will be needed to help prevent further significant redundancies given the uncertainty around both the pandemic’s trajectory and the timing and speed of any economic recovery.

We believe that a gradual phasing out of the CJRS from April to the end of June would provide sufficient support for job protection, with the extension buying time for the vaccination programme to take fuller effect.

CIPD’s view is that the CJRS wage subsidy should gradually reduce over the period to 70% in April and then remaining at 60% for May and June, which would mirror the way the wage subsidy was reduced over the summer and autumn this year.

The Government will of course rightly be extremely concerned about the cost of extending the CJRS, but calculations will also have to take into account the costs of not doing so. These include a significant increase in the number of people claiming Universal Credit, and reduced confidence and spending power in the economy at a time when both have never been more needed.

Jobs that are lost over this period are likely to feed into long-term unemployment as recruitment and onboarding costs will mean cash-strapped employers will hesitate to hire permanent staff until they are certain about the strength of the economy.

Finally, CIPD’s third recommendation is for the next phase of the CJRS to be linked to support to enable firms to train staff who are fully furloughed or working reduced hours and to provide funded outplacement skills development support to any worker made redundant.

This support could be provided by enabling firms in England using the CJRS to utilise their Apprenticeship Levy funding for other forms of accredited training and skills development, as well as apprenticeships. In order to support smaller non-levy paying firms, we would like to see the creation of a CJRS training fund of up to £100 million, which would be funded from levy paying firms’ expired levy funds that would otherwise go to HM Treasury. We calculate that this could pay for training or outplacement skills development support for about 160,000 workers in small firms.

With agreement, the Scottish and Welsh Governments could allocate additional revenue to support training for firms using the CJRS during 2021, to ensure training support via the scheme is UK-wide.

These measures would provide a valuable boost to the skills development of the UK’s workforce, with our Autumn Labour Market Outlook Survey of 1,000 employers showing there will be a net reduction in training investment over the next few months as firms look to cut costs.

In summary, setting out a clear plan in January to extend the CJRS to the end of June and linking the scheme to support for skills development will boost business confidence and mitigate the numerous uncertainties firms are facing as a result of the pandemic, as well as any challenges they may face arising from the end of the Brexit transition and over the timing of economic recovery.

Yours sincerely,

Peter Cheese

Chief Executive, CIPD

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