The pandemic brought uncertainty and despair to the whole world. As businesses shut down and people had no means of income, it became clear that the government had to intervene to save further economic collapse. In England, Chancellor Rishi Sunak introduced the furlough scheme when the pandemic began. The idea behind the scheme was to save jobs during the pandemic.
Let’s find out more about this scheme:
What is the furlough scheme?
The furlough scheme was directed towards the staff of businesses who had stopped working since there was no work during the pandemic. The scheme kept all these people on a payroll.
According to the scheme, employers could and did claim a grant from the government. The government then paid for a part of the hours the employees didn’t work.
The scheme aimed at providing a respite to businesses struggling during the pandemic while allowing workers to receive an income. The result was for all the workers to return to normalcy faster once the pandemic ended.
When does the furlough scheme end?
The furlough scheme finally ended on September 30, 2021. However, between March 2020 and June 2021, the government paid 80% of the furloughed worker’s salaries with a £2,500 monthly limit.
This strategy was then phased out:
- Starting July 2021, the government paid 70% of furloughed people’s salaries up to UK Pound 2,187.50 per month, with the employers paying 10%.
- The government paid 60% of wages up to UK pound 1,875 a month through August and September, with employers paying 20%.
According to data, 11.5 million people have used the furlough scheme since it began in March 2020.
What will happen next?
The next few months are full of uncertainty as the UK is dealing with fallout due to the end of the scheme.
Although, experts across the country are putting forth their predictions. Here are some of them.
Rise in unemployment
By September, the last month of the scheme, close to a million people were still furloughed. As the scheme ends, the pandemic calms down, and things come back to normal, businesses will realise they don’t have the budget to afford staff on the payroll.
This year between May and July, the unemployment rate lingered at 4.6%, according to the Office for National Statistics. However, as the year draws to a close, this percentage might go up significantly.
A rise in personal debts
As people are unemployed, they will struggle to pay their bills and taxes. As a result, there might be a rise in credit card usage, more loans, and overdrafts.
More people will put their houses on the market.
Once people lose their jobs, they will look for another job. But since the situation is the same across the country, failure to find a job would mean failure to pay their mortgages. In addition, it might force some to sell their houses.
Some will return to work.
While some of the furloughed workers are laid off, others will return to work. However, during the furlough period, some people’s pay dropped below the national minimum wage and living wage mark.
But, those who will return to work must be paid according to the legislation.
The government had designed the furlough for workers on the payroll. If a worker is made redundant once the scheme ends, they must receive a notice. The worker is entitled to tax-free redundancy pay. They can opt for financial support from the following:
- Universal credit
- New Style Jobseeker’s Allowance
- New Style Employment and Support Allowance
The furlough scheme has undoubtedly benefited millions of people across the country. At the start of the year, the unemployment predictions were one in 10; the current unemployment rate has been less than one in 20.