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Anyone surprised/disappointed at employers using furlough?

(42 Posts)
victorioussponges Sun 05-Apr-20 11:00:38

When the government first announced the furlough scheme I (perhaps naively) anticipated it being used primarily for people who were prevented from doing their jobs because of the outbreak - e.g. hospitality, leisure etc. From what the government said I thought that was what they had in mind, too.

Fast forward a few weeks and all manner of companies seem to be using it to reduce their overheads at this point. My employer (medium sized professional services company - fully equipped to work from home) announced on Friday that they're currently identifying roles for furlough because of anticipated reduced client income in a particular area of the business.

Is that really what it is for? In the case of my company it's brought home that either we're taking advantage of the scheme to take some of the sting of our clients not sending so much work (which seems a bit wrong - if all companies do that we're going to pay for this for who knows how long), or the company is much less robust than I thought we actually need the scheme to prevent job losses - which is crazy given that some parts of our business are really not so affected?

After deductions it looks like furlough would come out at 1k something per month which will make finances quite tight. Lovely food for thought over a weekend. Anyone else feeling similar?

OP’s posts: |
CovidConcerned Sun 05-Apr-20 11:08:47

If there is reduced client income then furlough is there to help. I think they are being a responsible employer, protecting the company so they can come out of this in one piece.
The companies who are experiencing increased demand like supermarkets are recruiting.

Saz12 Sun 05-Apr-20 11:11:20

I kind of agree: furlough funds were made available to make sure people weren’t made redundant and had jobs to go back to when this is over.

But most employers don’t make skilled employees redundant over a shorter term slowdown in business (obviously they would if they lost 100% of their turnover, but not for say 20% of income).

I hope the govt sorts this out as I (Mrs Taxpayer) would strongly resent my (tax) money being used by the likes of Amazon in this way.

Tonyaster Sun 05-Apr-20 11:11:52

We are planning to furlough workers. We don't have enough work for them. It will be for May only. Then I imagine the furlough scheme will finish and we'll have to make redundancies or put people on short time working. I imagine most employers aren't doing this for shits and giggles.

flowerycurtain Sun 05-Apr-20 11:18:17

Completely agree

BrieAndChilli Sun 05-Apr-20 11:30:31

My company is tiny (less than 10 employees) and bar a couple of digital projects that are finishing up all our other jobs - exhibitions booths, events, videos, etc have either been cancelled or postponed for at least 6 months.
That means pretty much no income coming in so we have been furloughed. Once this is over our clients will restart projects (pharmaceutical companies so unlikely to go under) and we will have work again but because the company is tiny it doesn’t have the cash reserves to pay all outgoing and staff as usual for the next few months without going bankrupt.

BrieAndChilli Sun 05-Apr-20 11:31:44

I do hope HMRC will be checking companies are using cash reserves first - I can’t believe some of these large companies - macdonalds, topshop, virgin etc don’t have any cash to pay at least a month or twos wages.

ArchbishopOfBanterbury Sun 05-Apr-20 11:44:16

Even if the company definitely has the cash reserves, and is easily equipped to work from home, that doesn't mean our jobs are doable alongside full time parenting.

I fully expect my work to furlough some of us working parents of preschoolers.

esjee Sun 05-Apr-20 11:52:30

Companies with a significant reduction in business can't just use their cash reserves first (assuming they have a sensible amount). If this happened in non-pandemic times their first measure would be to cut costs in response, including redundancies. It will be a difficult road getting back to normal. If a company uses all its cash reserves and keeps all its staff, and business is slow to reach the levels it was previously, how long do you think this company will keep trading forwhen restrictions are lifted? At best there would be a slew of redundancies then, do they absolutely should take advantage of the govt scheme to help avoid this. This does not spply to companies who are taking a slight hit, but those who have lost a significant amount of business - it would be silly to use cash reserves first.

Makeitgoaway Sun 05-Apr-20 11:55:24

I'm disappointed in the number of big using it and not topping it up.

motortroll Sun 05-Apr-20 11:56:28

We've used it in our business for reduced business but we know the business will be there once this is over (it's aerospace) so we have furloughed 2 employees. They can't work now but we need them to sell and build the business back up. It's directly linked to corona virus.

PicsInRed Sun 05-Apr-20 12:09:29

But that's what it's for.

It's meant to be used to keep people employed who would otherwise be made redundant due to lowered demand. That way, less people are unemployed and potentially long term unemployed/unemployable when the crisis is over. The economy is frozen in place at 28 Feb 2020.

Those employers are literally using the scheme as it is literally intended and designed. 🤷‍♀️

Deux Sun 05-Apr-20 12:12:58

Well the alternative could be laying everyone off then recruiting when business picks up.

Given that wages are usually the largest cost to a business it’s not surprising that businesses without trade are furloughing staff.

Remember that 90 % of McDonalds branches are run as independent franchises.

Makeitgoaway Sun 05-Apr-20 12:13:16

Does minimum wage still apply or are people expected to live off 80% of minimum wage?

Quickquestion2020 Sun 05-Apr-20 12:16:54

We furloughed staff. It was that or sack them. Because we can't work a the moment. And no, I wont use every last penny my company has to continue paying wages. Because then I cant start trading again. I need to spend money to make money.

Quickquestion2020 Sun 05-Apr-20 12:18:07

Companies are far less robust than people believe. Directors and companies have far less money than people think. We need support to prevent job losses and I'm very glad our government is offering that to all employers.

WoollySheep462 Sun 05-Apr-20 12:28:43

A lot of income is being lost due to social distancing measures.

It really only claws back a tiny amount for the business. What some decent employers with greater financial resilience are doing is topping up to 100%. Some have kept them on at 80%.

KenDodd Sun 05-Apr-20 12:30:55

Completely agree. I hoped it would be a last resort, instead it's turned into a first resort for many companies with billions off shore (to avoid paying tax) that could easily afford to pay their staff out of their own money.

KenDodd Sun 05-Apr-20 12:32:38

And before anyone has a go, I'm not talking about small businesses with tight resources.

WoollySheep462 Sun 05-Apr-20 12:36:52

Not all big companies have large amounts of cash. What they tend to have are diverse income streams but this is like none other crisis where multiple streams are affected. Not sure there is one size fits all answer.

WoollySheep462 Sun 05-Apr-20 12:38:14

There is a website somewhere with a list of companies coming out good/bad in this. You can't paint it as big v small.

chipsandgin Sun 05-Apr-20 12:40:34

It’s what the scheme is for. Our company (20 employees) will continue to trade but it is likely that the workload/income will be greatly reduced, if you do cashflow forecasts this means that if the entire workforce were maintained on a salary during this period there would not be enough work for them to do, the reduced income and continued salary/tax/NI payments would deplete company funds to the point that nobody would have a job at the end of it & it would come to a point the remaining productive workforce would not be able to be paid, so the company would go under.

Also FT working parents (not key workers) can’t work FT with kids at home -or rather not effectively and it isn’t fair to expect them to. Therefore a percentage of the employees will be furloughed in order to make the company viable in the long term.

Using furlough to reduce overheads makes economic sense in that it will mean that the company can keep 20 people employed after the crisis is over - furloughing them isn’t for fun/taking advantage, it’s using the government resources in the way they are intended.

If companies only used it because they ‘aren’t trading‘ rather than because they are, but in a reduced way, it would mean potentially millions of unemployed in the not too distant future and entire industries going under, which in the long term would cost the taxpayer more.

It sounds like you’re issue is more with you having to survive on less money than an issue with the scheme? In our case everyone will be getting 80% of their salary (because most salaries are under 30k), which given that most people’s costs of travel, childcare and no going out etc will mean they can get through this and have a job to come back to which will help a crippled economy more than them becoming unemployed. I’m pleasantly surprised, especially coming from the Tories - it will mean less job loss and (a reduction in at least) mass unemployment. Would you rather be made redundant?

An employer with a sudden drop in income without the furlough scheme then making redundancies would be the only other option. They are basically paying you to do a job, there is no obligation to continue doing that if there is no work for you, even if other areas of the business are continuing or if they have money in the bank (depleting that in the short term to pay people to do nothing makes no sense for a company who wants to survive).

If furlough wasn’t available, then your personal options when made redundant would be UC (if your household income and savings fall below the threshold - which would cost the tax payer more, especially if you continued to be unemployed after this is over) or if you have a partner earning 25k or more or you have 16k in savings then no personal income at all? I know which option is rather go for!

victorioussponges Sun 05-Apr-20 12:42:20

Thanks all - no criticism of companies doing this where there is a real threat to their future and their employees' jobs. I am just wondering if so many companies (including my own) really are in that position or are looking at some losses that at other times would be absorbed.

OP’s posts: |
Toomanycats99 Sun 05-Apr-20 12:43:56

I work in a large company. They told us last week the expected profit before and after corona for the next quarter - it's a huge swing. They need to take the actions now as who knows how long the impacts will last - they need to ensure they are still strong enough to trade after.

Aceventura20000 Sun 05-Apr-20 12:46:34

I’m pretty certain it wasn’t intended for the likes of Liverpool football club and Spurs.

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