Furloughing – different approaches and impacts around the world

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Furloughing – different approaches and impacts around the world

National differences between countries’ responses to Coronavirus are fascinating. A global experiment that no-one would have wished for is happening right now, testing how our social & economic systems adapt. National differences affect government policies, organizations, and how employees are treated. These will have impacts on how well people, organizations, and economies recover afterward.

National responses

Some countries – such as the United States – have addressed the loss of work by making direct government payments to individuals. It is up to employers to decide whether to retain employees. 

Other countries have used the employment relationship to maintain people’s income during the crisis. In the Netherlands, for example, any business whose revenue has dropped by 20% or more can seek financial support to replace lost revenue and retain staff. In the Netherlands’ case, employees are retained in work: the scheme cannot be used by a company that makes people redundant at the same time.

The UK has adopted a third approach, with government payments to companies that ask staff to take a temporary leave of absence, called ‘furloughing’.

No approach can take away uncertainty. In the US, the impact must be desperate when healthcare insurance is often tied to your employment. In the Netherlands, the uncertainty is less, but still has an impact: “I wonder if we will ever go back,” says one restaurant owner, “the way we used to do business may not be possible anymore. We have shed tears over this, but now we are planning what we can do.”

This article is focused on the personal and economic impact of uncertainty on the people and the business. How does it feel to be put on temporary absence? Michaela Gartside, director of outsource provider The HR Dept, said: “The novelty has worn off. People are itching to get back to work. At first, it was a crisis, and everyone was relieved to stay at home, safe, on 80% of the pay. Great weather helped. The longer it has gone on, people have become more anxious: bored, and wondering about the future. People are not yet searching for jobs, but their worries building up.” So what can employers do for the best?

In some industries there need be no shame: cafes, restaurants, bars – in many cases these businesses are entirely closed down. In others, however, the case is more difficult. Who has been chosen for furloughing (temporary absence)? Is the issue the role or the person? HR experts advise businesses to select staff for furloughing based on evidence of value to the business – which adds to the risk that furloughing might be seen as a message about the future.

How does furloughing work?

In the UK, the government will pay 80% of a person’s salary up to £2500 per month plus benefits for people who are furloughed (put on temporary leave) for at least 3 weeks. What happens to those people?

  • They are not allowed to do any work for the company – even part-time, even if the company tops up their pay
  • They are allowed and ‘encouraged’ to do training
  • They are allowed to work for another employer (not linked to their current employer).

What is the impact of furloughing on the employee?

The big challenge is that people may become disaffected, or lose capability during their period away from work, a problem economists call ‘hysteresis.’

  • Furloughed employees may risk being de-motivated during exclusion from their employer
  • Furloughed employees may fall behind peers in learning new ways of working
  • Employees may not know about changes that are happening in the business model
  • Employees will fear what happens next – what kind of job they will come back to?

Government policy sometimes neglects the employee

The UK scheme is “designed to help employers …to retain their employees and protect the UK economy.” The UK government tells companies only to contact HMRC online and follows up with three paragraphs emphasising the penalties for fraud. The scheme allows for the possibility of individual development during the furlough period and mentions that people may be redirected to other employment opportunities. But training is mentioned just as an option (buried 3500 words down a 4300-word webpage):

If your employee undertakes training 
Furloughed employees can engage in training, as long as in undertaking the training the employee does not provide services to or generate revenue for, or on behalf of their organization or a linked or associated organization. Furloughed employees should be encouraged to undertake training.”

The defensive attitude from the government is worrying to anyone who thinks that retaining skills and engagement should be set out as the purpose. This scheme risks causing damage because there is no human-centred ‘Why’ – an issue that an author like Simon Sinek might highlight as a key failing. The lack of a human-centred ‘why’ is an area of UK government policy delivery that could be much improved.

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As a consequence, when people talk about the scheme their first instinct is to insist on compliance with rules, as opposed to the reason behind the rules. They say ‘you are not allowed to do any work for the company!’ (Farrer & Co, Lewis Silkin). Furloughed employees will feel they should not be in any contact with their employer. They will receive less attention from busy HR people who are trying to keep their companies afloat. I would suggest, by contrast, that any employer whose staff are on temporary absence for economic reasons should put extra efforts into engaging, encouraging and motivating their staff.

What should a company do?

In this situation, I would encourage any company furloughing staff to spend some time thinking: 

  • What is the future of our business?
  • What kind of job will the employee come back to?
  • How can we treat employees like adults and share our thinking with them?
  • Can the employee start to think about redesigning their future work?

The last of these risks being contrary to the UK government’s rules: it could be construed as ‘providing services to their employer.’ But this doesn’t make much sense: as Gartside comments “these furloughed employees have ideas. They say to themselves, if only the business would do this, it could help. But if you’re not in touch with the employees you never hear those ideas.”

The work / don’t work quandary exemplifies how countries could improve their guidance by stating the ‘why’ (‘retaining and building skills for future employability’) and using that to guide communications and decision making.

What should a company say?

I would encourage any HR director (and politician) to say:
‘Times are hard, and we are really sorry not to be able to keep you busy. But if you can seize it, here is the most unexpected and wonderful opportunity. When did you last have a chance to invest in your own training? What would you have given for someone to pay you to stay at home and learn a new skill for 3 weeks or 3 months? Take this chance – and please stay in touch with us; we’ll stay in touch with you. Let us know how you are doing, and how you are progressing against one of four targets: 

  • taking care of yourself and your family
  • learning something new
  • keeping busy in another role where you can help a business or society, or 
  • thinking ahead about how we can work differently when we can return to work’

A better ‘why’ is what I would recommend, and encouraging employers to engage with furloughed employees to plan the future. Other countries have supported companies with replacement revenue – leaving it up to them how to agree on how to reallocate people’s effort. For Gartside at The HR Dept, the best path out of the furlough would be to allow people to return to work part-time, not all or nothing.

How does this work in your country? I would be fascinated to hear of more examples of how HR is managing the impact on employees in other places, and what methods might be better or different. I added some of the national differences in the section below.

National differences

  • The United States government’s main website focuses on the individual: ‘How to prepare and protect yourself’ … ‘What to do if you are sick’. Many actions are personally branded: ‘President Trump has unveiled…, President Trump is helping…
  • The UK government has reverted to a wartime mentality. Black and white layout with strictly imperative verbs dominate its website: “Stay at home. Only go outside if… If you go out…Wash your hands.” You almost expect to see ‘Keep calm and carry on.’
  • In Europe, the Netherlands website expresses a national preference for co-operation with two references in its first two sentences: ‘Together, we’ll get coronavirus under control in the Netherlands…. information about what the Dutch government – together with other organizations – is doing.’ The German government website meanwhile has one reference to ‘together’ and another to a great test and a restated need for European solidarity.
  • In the Southern hemisphere, New Zealand is ‘Uniting against Covid’ on the NZ government website, and Australia is focused on supporting each other: ‘Help protect your family, friends and community’ on the Australian government website.

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