The outlook for UK jobs is the gloomiest in almost three decades, according to the latest employment survey by recruitment firm ManpowerGroup.
It found that companies in all big sectors of the economy are more likely to cut jobs than to hire people over the next three months, from July to September, the weakest forecast since records began in 1992.
The survey comes as companies prepare to start weaning themselves off the government’s furlough scheme, which covers the wage bill of almost 9 million workers.
Businesses are expected to announce a wave of redundancies in the coming weeks, as the government gradually reduces the support available through the scheme.
Redundancy consultations require between 30 and 45 days, depending on the number of staff affected, meaning companies deciding to cut jobs will have to start the process in the coming days.
Firms will have to decide whether they can afford to keep staff on furlough when they have to start contributing towards the cost of the government scheme or choose to make workers redundant.
“From the middle of June, I expect a significant increase in redundancies,” said Andrew Sanford, a business advisory partner at the tax and advisory company Blick Rothenberg.
The furlough scheme, which began in March, is costing taxpayers about £14bn a month, and is being used by about 1m firms.
The chancellor, Rishi Sunak, announced at the end of May that the Treasury would slowly taper the furlough scheme – which currently pays 80% of wages up to £2,500 – from August.
Businesses will initially have to pay employer national insurance (ER NIC) and pension contributions for workers kept on furlough, which is equal to about 5% of gross employment costs before the furlough scheme started.
However, from October the government will be paying only 60% of wages, up to a cap of £1,875, while employers will have to contribute 20% plus ER NICs and pension – equal to about 23% of gross employment costs pre-furlough.
If firms do not believe they will have the income to begin paying towards the furlough scheme from August, as well as covering holiday pay, they may decide to make workers redundant.
Gillian McAteer, the head of employment law at business advisory firm Citation, says there has been an “enormous increase” in questions from clients about redundancy.
She said one in five of all queries coming in from clients are now about job losses, but added that making workers redundant can be expensive.
“A lot of them have got no income coming in at all, so therefore they are looking at losses and what is keeping them going is borrowing. Questions that we are getting a lot of are ‘I need to make people redundant, but I can’t afford their redundancy pay.’ There is emergency borrowing you can ask for if that is the case,” she said.
A number of other changes to the furlough rules will also affect employers’ decisions over whether to keep staff on.
Furloughed staff can also be brought back to work part-time from 1 July, with employers paying wages in proportion to hours worked.
However, Sanford warned that only staff who have been furloughed for three weeks before 30 June can join the part-time scheme, so companies must decide by 10 June what to do about those workers.
In addition, from 1 July companies are not allowed to have more employees on furlough than they had earlier in the year.
Sanford said that to avoid widespread job losses later in the year, the government should consider continuing the furlough scheme for the sectors of the economy most affected by the shutdown.
“There are some sectors where government support up until the end of October will be adequate, and there are others, in particular hospitality and retail, where with social distancing measures I don’t see how they can recruit all of their staff back.”
