Why are people on furlough losing their jobs?

[unknownn]

This may sound super stupid but I've got a burning question I cannot find the answer too on google
Many of my friends have been furloughed since all this began, they're cherished members of the company, no reason to want to be let go of. But a few of them have lost their jobs. I cannot think as to why people that are on furlough are losing their jobs? Surely it can't be that the company can't afford them , as the government is paying for them? I thought maybe because when this is all over the company won't be able to afford them, but why not just keep them on furlough and make that decision in the future ? Sorry if I'm being stupid ..🥴

A lot of people on furlough are, in reality, already redundant.

Companies were encouraged to furlough those staff back in March.

But they still need to pay the staff upfront and wait to be reimbursed.

The mood music from the Treasury is changing about furlough and I think the risk of not being reimbursed if you hare seen to be misusing the scheme is increasing.

Also this creates a cashflow problem.

I would think the number of people who can and will be furloughed from March to October is small.

My friend received one furlough payment and is now redundant. It's happening as we speak.

Because redundancy consultation period will taken them into period where it starts to cost them

Also cash flow reasons as companies are having to wait for gov reimbursement

@PrimeroseHillAnnie I’ve been an accountant for
30 years and that has never been the case - they dont make those kind of decision either

Staff are not the only costs. My friend has just been made redundant as the business has folded due to C19. Even if you aren’t paying staff you still have to pay you bills and with no £ coming in those bills soon outweigh what you can meet. Office, contractors, goods you pay for in arrears, etc

They also pay NI on the employees. It isn’t cost free to the companies

Under the job retention scheme the employer’s NI is also refunded as well as the statutory minimum employer’s pension contribution. So you are incorrect.

However, the grant is taxable so if the company makes a profit for the year, Corporation Tax would be payable and the grant would count towards that profit. So that is also why employers are making redundancies.

Only up to the £2500 maximum muddy dog. Not on top.

It's cash flow. And directors worrying that their business is going down the pan won't want to be criticised in an insolvency situation later on when they haven't got the money left for statutory redundancy payments.

Under the job retention scheme the employer’s NI is also refunded as well as the statutory minimum employer’s pension contribution. So you are incorrect.

I stand corrected on that point. However, holidays are still accrued and employment rights continue so if the end result is going to be redundancies, it makes sense for businesses to be ripping the plaster off right now rather than waiting.

mrsbyers my husband has been a company director for numerous companies and has constantly had to fight the FSO’s regarding the need to employ people in this country or even keep capacity in this country. Even if he succeeds he is constantly under pressure to reduce head count. It’s a default position of every beanie he’s worked with.

Yes but very few employers top up over the 80% or £2.5k, and those who do are probably not struggling as much and not planning on redundancies.

Because the work levels are not going to increase enough to reinstate them. By continuing to furlough they are preventing the person from then gaining full paid employment else where.
Double edged sword tbh, they are being paid 80% wage for doing nothing this may be helpful for some but not others. Some on lower incomes are struggling to survive on 80% wage and by being released from furlough can look for employment else where. It's not right for employers to continue to furlough if there is no possibility of the position becoming tenable again.

However, the grant is taxable so if the company makes a profit for the year, Corporation Tax would be payable and the grant would count towards that profit. So that is also why employers are making redundancies.

Offset by the expense of the staff cost, so should be no net taxable income remaining.

Staff cost more than just their salary and companies want to rid themselves of these costs ASAP.

Also, in some cases, they have realised those who have been furloughed wouldn’t be missed even if things pick us, so I think some companies are using it as an excuse to restructure and get rid of under performers. Sounds harsh, but not harsher than pre- corona redundancy programmes.

My son was made redundant from his furloughed job at a cafe. He's a student it was part time. I understand that if they reopen it will most likely be for takeaway and they wion't need him, but I don't understand why they didn't let him stay at least until the original June ending of the furlough scheme. He can't get another job at the moment.

Because wages are just one of the many costs that companies have to pay.

You have no income coming in, then you can't pay your bills and therefore you can not trade as a business.

We have an employee on furlough.

The government will pay 80 percent of salary (for now), but we’re still paying tax, pensions, registration fees, insurance etc etc. So if we decide for sure we won’t have work for them in future, it would make no financial sense to keep them on.

We’re trying to find ways to have enough work for them to do, but it’s not looking likely right now.

To an extent the furlough scheme was to soften the blow: so everybody on furlough should be saving, looking into other jobs, and generally preparing in case they don’t have a job to go back to (as much as possible). That way it won’t be quite so bad even if they do lose their job in a few months.

Statutory notice is one week per year of service, contractual notice can be more. So by giving notice now, employers can keep people on furlough and get 80% of the costs of notice, rather than having to pay 100% as a payment in lieu after the furlough scheme ends.

So many people think that because people have been able to furlough people, the business must be able to stay afloat.

They cant. They still have to consider accrued leave, NI, pension contributions. Even things like moving g premises or closing premises.

The furlough payment was meant to be to keep people employed in the short term. But some business sti can't go back or work out how to go back.

If your business is not making any money or 90% of your customers have gone under and you cant meet the costs, what do you expect them to do?

As otters have said, the business still has costs for staff on furlough. DH has several staff on furlough. He’s lost 75% of his order book. He realistically knows that he will not need many of his staff in a few weeks time. He has had a hell of a time making people redundant, and identifying which ones to continue or furlough or bring back.

Salary isn't the only cost of keeping a business running. If they can't meet their overheads while closed or while taking far less income then they may need to let staff go in order to stay afloat.

I've never been more worried about my own business but also never been more thankful that it's only me - I am not responsible for anyone else's livelihood.

It's the cash issue. The government doesn't pay employees directly, unlike in many other European countries, due to the way our system is set up it was judged too hard.

Therefore the employer has to pay the employee first and claim the money back. As others have pointed out, there's also NI, other benefits etc to pay. If they don't have cash in the bank to do this, and can't easily access a loan (or can't see how they'll get the cash to pay back a loan later), they need to make employees redundant.

In our company it's because the long term effect of Covid will reduce our incoming revenue stream for a good year, plus Covid has shown a new way of delivery can work really well and they don't need as many of us to deliver it. Finally one of the industries the other half of the company deliver to is hospitality , which is tanking and will continue to for a while.

The reality is the decision to furlough some of the company was very obviously made with similar criteria to redundancies and they haven't hidden that they cant promise there will still be jobs to go back to.

I'm one of the fortunate ones not furloughed, for those that are , they are desperately sending CV's out ( we do have a massively online aspect to what we do for a living so genuinely they probably have more chance if getting a new job during covid than other industries.).

Even I'm signing up to freelance online agencies to back myself up just in case.

The realities are now hitting home.

There have been umpteen numbers of threads over the last how many weeks of people planning how they are going to spend all their saved furlough money/ no commuting / no Costas and a pair of shoes/ socialising money just as soon as lockdown is over on handbags and pieces of jewellery and the like.... and people claiming how these purchases will keep the country ticking over.

It's only slowly slowly dawning on people that the post lockdown world will not look anything like it was before. The reality is going to hit people hard. Myself and my business included, so it's not that I want it to happen, but I am surprised at how many people did not see this coming

I was told today my furlough is ending 30th June. No job to go back to. The thing is it costs businesses to process the furlough claims, if you have no cash flow coming in that's an added expense you don't need. I don't feel optimistic about the job market 😬😣