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Tough Choices in Tough Times

August 6, 2021

In these unprecedented times, the UK government announced the ability for businesses to furlough their employees but is this really the right decision for the employee in the cold light of day?Furlough – the quick fixFurlough was a knee jerk reaction to COVID-19, but there are still many unknowns about how it affects the pay (including holiday pay) of PAYE workers whether in direct employment or employed through umbrella agencies. If you are self-employed or contracting, you cannot be furloughed, and must look to other options should you not be required to work.If you are currently paid more than £2,500 a month, this will be the maximum that you will receive from the government at 80%. However, your employer is not obliged to top up your salary, and there is no legislation in place to mandate this.Whilst an employee must agree to a furlough, effectively, you are agreeing that your job is deemed as non-essential. Should there be a period of restructuring for financial stability following the COVID crisis, non-essential roles are the most likely the first to be cut and can this happen whilst you are on furlough. As no one knows how this will play out yet, you could be playing Russian roulette with your job.Taking the pay cutIt is a tough choice, but taking a pay cut can be the difference between having saving jobs or laying employees off. Take the COVID-19 pandemic as an example, people can be furloughed as a short-term saving, but ultimately the financial forecast of a business post-COVID may mean that restructuring and redundancy may be inevitable. However, if employees are willing to accept a 10% pay cut, this may negate the need for those cuts and may save a business from folding.For employees who have taken pay-cuts, the main reason cited was loyalty to the business that they worked for and to their co-workers. It is a “do whatever it takes” mentality to support the business.The downside to a pay-cut, however, is that you will still be working and there is no other form of compensation other than the fact that you may have a job when all of this is over.Pay-cuts in the boardroomTo avoid placing employees in furlough or putting the business in financial distress, some of the UK top companies have agreed board-level pay-cuts and have scrapped annual bonuses. Construction giant Taylor Wimpey and luxury clothing manufacturer Burberry are amongst businesses whose senior executives have taken a 30% salary cut in order to protect the business and its staff.Tough choicesWhilst an employee must agree to either a pay cut or to be furloughed, ultimately the decision is Hobson’s choice and out of their hands. At a senior level, the finance figures have already been checked, and the strategy agreed, and one or the other is inevitable.Neither option is perfect, but when considering the long term, one of the options may just be the difference between having a job with your current future or not.

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