IoD: Furlough costs will mean ‘difficult decisions’ for firms

A quarter of businesses using the Job Retention Scheme say they will struggle to contribute to furloughed workers’ salaries from August, in a new survey from the Institute of Directors revealed today [Thursday].

  • In a survey of almost 700 company directors, around half of those using the Job Retention Scheme for their staff said they could provide 20% or above toward furloughed workers’ full-time salaries between August and October. However, a quarter said they could not afford any amount.
  • Over a third of those using the Job Retention Scheme said they would bring the majority of their furloughed workers back part-time, if the scheme allowed it. Less than one in ten said they wouldn’t bring anyone back part-time.

To protect jobs, the institute called for as much flexibility as possible in the system, with the majority of those polled who had staff on furlough saying they would make use of shorter minimum furlough periods if allowed. Currently, workers must be on furlough for at least three weeks, making it difficult for firms to react to uncertain demand.

As businesses return to work the Institute of Directors called on the Government to provide targeted financial assistance for SMEs needing to make health and safety adaptations to their workplaces. Around 1 in 3 business leaders polled said financial support for adjusting workplaces would help get their organisation operating safely under social distancing, second only to better clarity around commuting on public transport.

The polling was conducted between 20-27 May, with 697 respondents.

Jonathan Geldart, Director General of the Institute of Directors, said:

“The furlough scheme is protecting millions of jobs. Business leaders know that the Government’s support can’t be infinite, but the ugly truth is that if there’s no money coming in the door, many firms will be forced to make difficult decisions come August.

“Directors will be fighting tooth and nail to avoid this scenario. Companies are innovating, creating new ways of working, and launching new products. There is hope that as more areas of the economy return to work, more companies can keep people on board. However, despite best efforts, many firms simply won’t be able to work at full capacity for the foreseeable future, and there’s no magic wand to lift demand back up again.

“The Government must soften the blow by introducing as much flexibility as possible into the furlough system. The more flexible the scheme is, the better firms can recover, and the fewer jobs will rely on state subsidy. Being able to bring people back part-time will help a lot of companies, but there are other changes business leaders would like to see, such as reducing the minimum furlough period.

“With the prospect of job losses, and businesses struggling to create new roles in the months ahead, the spotlight will be on our training system. Businesses are eager to work collaboratively with government to lift skills across the board.”