What the chancellor announced today will help businesses retain employees and save the treasury billions
The announcemnt of the chancellor Rishi Sunak on the future of the job retention scheme, was music to my ears. Most people and businesses today understand that with such an economic shock, recovery for business and jobs will be a slow uphill battle and not fast and painless as everyone hoped.
The big question though, was what the government would do besides extending the program as it happened last time.
Let me take a step back and mention I have vast experience of a major crisis in unemployment having worked in the recruitment sector in Greece between 2005 and 2016. When the financial crisis hit, the unemployment rate was also hit very hard in Greece with the rate exceeding at times 25% of the working population and 45% of the under 25's. One thing I took home is that longer term unemployment diminishes the chances of anyone to go back to work. The reason being is that anyone that stays away from a workplace for a long period faces 3 big problems; loss of valuable contacts with potential employers, loss of valuable work skills and loss of the personal mental balance that a workday routine offers.
Millions of employees on the current job retention scheme have already started experiencing this anguish, and are facing questions like:
Is my employer going to get me back anytime soon or ever?
What should I do to keep my skills up to date and my connection to the employment market fresh?
How am I going to keep myself centred and balanced when my entire routine has shifted overnight and not face mental health issues?
In my experience, the key issue with the original job retention scheme was that it did not provide a long term solution. It was a stop gap that did not really allow employers to organise their workload using all their staff, nor gave a clear message to employees about their long term employment chances. We at Broadbean saw a strange trend arising that while jobs were at an all-time low, jobseekers were not really looking for jobs, as depicted in the graph below, the entire recruitment market faced an extended lull.
To all these issues raised above, the chancellor today provided a great answer- gave employers and employees a way to re-connect and save the Treasury billions while extending the job retention scheme and making it truly effective.
He only needed to look at the example of how countries like Germany (Kurzarbeit), France, Sweden and others implement the exact same type of scheme a lot more effectively. I work in a multinational business and have first-hand experience of how these programs work in these countries.
All these countries allowed employers, through their retention schemes, to reduce the working hours of their staff, they subsidised the lost working hours proportionately the same way the Treasury is currently subsidising the entire employee salary in the UK.
The benefits of this new for the UK approach are obvious:
- The employer does not learn to live without the employees for months and months to the point where the retention scheme may become just a step to further redundancies.
- The employees do not lose their connection to the employment market, their skills or employability nor their mental balance.
- The Treasury does not need to take 100% of the financial burden to support the scheme as it will share the burden with private employers.
To paraphrase history today was a small policy change for the Treasury but it can be a leap for the many millions that faced the cliff edge of unemployment.