Last reviewed 29 July 2020

What can employers who are planning for a post-Covid economy do to strike a balance between redundancies and recruitment? Opeyemi Ogundeji, researcher and employment law writer at Croner-i, explores this in more detail below.

Coronavirus updates have flooded the news in the past couple of months as the Prime Minister continues to relax lockdown rules across the country. The news updates relating to the coronavirus have been focused on how organisations are coping with the strain of lockdown and the impact that growing consumer demand has had on some businesses.

Organisations that have relied heavily on the Coronavirus Job Retention Scheme (furlough scheme) are finding that they are still having to make redundancies despite the furlough scheme having been put into place until 31 October to save jobs. On the other hand, the hospitality industry, and some other in-demand industries have found that, since reopening, they have had to meet demand by hiring more staff.

Redundancies

There have been several organisations, including in the hospitality sector, that have gone into administration due to the significant drop in sales because of the coronavirus pandemic — many of them having to make numerous redundancies.

Most shocking though is the number of organisations that are relying on the furlough scheme which are already projecting that they may make all or some of their furloughed staff redundant when the scheme ends in October. This is likely to be due to the fact that a lot of employers, especially smaller ones, have suffered little to no patronage as a result of having been non-operational for the past couple of months of the pandemic.

Reports have shown that only 31% of organisations had remained open during lockdown, among other staggering figures. A breakdown is as follows.

A report by Bright Blue, an independent think tank, shows that:

  • although 58% of medium to large organisations have been able to top-up furloughed employees’ wages to 100%, more than half of the organisations under the furlough scheme expect to make redundancies

  • 3% of these organisations expect to make all their furloughed staff redundant after 31 October

  • 7% of organisations are unsure what they will do with staff after the cut-off date.

Recruitment

The Government has allowed most businesses to reopen since June, with leisure centres, such as gyms, being the latest to do so on 25 July. Towards the end of June, there were just under a million job postings in the UK and a 43% increase in the number of recruiters logging on to UK job board directory, WhatMedia, between May and June.

The hospitality industry has particularly increased its job postings as demand for bar staff has risen by 53% and 63% for waiting staff. Likewise, in other industries, there has been a 21% increase in glazier postings, 2.1% for barbers and hairdressers, and 9.3% for school support roles. Although recruitment for security guards, cleaners and retail staff have lulled in the past couple of months, we may start to see employers recruiting again across a lot more sectors.

This is of course in contrast to the number of redundancies taking place across the country among food and drink, retail and other industries.

As a result of industries reopening after months of national lockdown, we see that some employers are already seeing an increase in demand and are anticipating that this demand will continue. However, employers — especially smaller businesses — need to find a balance between their recruitment needs (to meet rising demand) and the likelihood of redundancies occurring if and/or when this demand slows or normalises.

What can employers do?

To strike a good balance between a possible need to recruit and to reduce the possibility of future redundancies, employers can:

  • recruit as normal (with provisions from the Good Work Plan, which came into force in April 2020, in mind) and place new staff on temporary or fixed-term contracts. These types of contracts will ensure that businesses meet demand in the short term, but are still able to terminate contracts or extend them if necessary; or

  • take advantage of Government bonuses instead.

What are Government bonuses?

The Treasury is making provisions so that as many people as possible retain their jobs. Tackling unemployment, particularly among young people, is at the heart of the plan set out in the Chancellor’s Summer Update to Parliament. Two of those provisions are:

  • Job Retention Bonus — employers will receive a £1000 job retention bonus for every furloughed employee that they bring back to work and keep until January 2021. The employee must earn at least £520 per month for the employer to be eligible

  • Traineeships and apprenticeships — the Government will pay employers £1000 to take on trainees for unpaid work experience and will invest £100 million to create traineeship places on Level 2 and 3 courses. Companies will be given £2000 each to encourage them to hire apprentices and there will be a new bonus of £1500 for employers taking on an apprentice aged over 25.

Takeaway

The post-coronavirus economy is uncertain and the full impact of it will unfortunately not be known for a while. It will depend on various factors, including the possibility of a national second wave of coronavirus, or more localised lockdowns as implemented in Leicester.

Some organisations may find that redundancies are the best way to keep their businesses afloat post-lockdown, and others may find that recruitment is the best way forward to meet growing demand. However, organisations need to be careful how they plan to move forward. It may just be that the Government bonuses, or temporary contracts, are a resourceful way for businesses to meet both their recruitment needs and reduce the number of redundancies that are likely to be made in the near future.

Conversely, some employers may not be able to avoid the inevitability of redundancies, especially those who do not have a high level of incoming demand and are likely to go into administration, in which case the Job Retention Bonus could be a viable option to consider.