With the government’s Coronavirus Job Retention Scheme set to close at the end of September, charities may have to make more difficult financial and operational decisions to determine whether or not the subsidised jobs can be saved.
Data published by the government in June 2020 revealed almost one-fifth of all voluntary sector employees were furloughed during the coronavirus pandemic. In response to an inquiry by the Digital, Culture, Media and Sport Committee into the effects of the Covid-19 outbreak on the sector, conducted during the first months of the pandemic, ministers reported that 164,000 jobs in the charity sector had been furloughed.
Additional monthly data published by HM Revenue & Customs at the end of last year revealed that 7,200 charities and almost 1,500 community interest companies and societies made use of the furlough scheme in December.
While the government has been slow in publishing the subsequent data in full, it is clear that the scheme’s impact on the sector has been huge. So, what potential consequences should organisations be considering when it comes to an end?
Breakdown in continuity
While many large charities furloughed staff to mitigate the loss of shop closures and live events being cancelled, the impact on smaller charities without substantial reserves or trading subsidiaries is likely to be severe. The Small Charities Coalition warned in April that one-fifth of small health charities would be at risk of closure once the furlough scheme ends.
“You can see a very clear distinction between those small charities that have and those that have not been able to use furlough,” Rita Chadha, chief executive of the SCC, says.
“For those able to take advantage of the scheme, they have indeed saved money in the public interest, but the breakdown in continuity is costing them dear.”
Chadha added that many small organisations were struggling to resume services, partly due to ongoing uncertainty about the easing of lockdown restrictions, the intensely competitive funding environment, and the need to reinvest in service delivery and design.
Figures suggest that resuming service delivery will be particularly difficult for many small charities when the scheme concludes.
Careful analysis and planning
Harriet Broughton, a partner in the employment team specialising in the charity and social enterprise sectors at law firm Stone King, says charities must consider the implications of the changes to, and end of, the furlough scheme.
“Careful financial and operational analysis will be necessary to determine whether or not jobs can be sustained, and if not, the options [that are] available,” she says.
“These may include consulting with staff about potentially reducing pay or hours, or potentially redundancies. In either case, charities will need to ensure they have a sound business case supporting the decision-making process, including demonstrating that they’ve considered all available alternative options.”
Judith Garfield, a director at Eastside Community Heritage in Ilford, believes a lot of organisations will suffer when the scheme comes to a close. She was furloughed from the charity, which aims to preserve local heritage and history and educational work in schools alongside community engagement, at the beginning of the pandemic, returning to work for brief periods between lockdowns.
“[Furlough] has been a lifesaver; we wouldn’t have been able to pay staff or rent [without it], which is still going to be an issue,” she says. “People have been able to live and feed their kids over the last year-and-a-half.”
Garfield returned to work in a part-time capacity in May. While she had nothing but praise for the work of big charities, she believes the scheme’s end and the sector’s recovery from the pandemic will be felt more acutely by charities at the bottom end of the income scale.
“There has been a lot of money pumped into the sector, but if all your staff were furloughed you couldn’t apply for it – whereas bigger charities, for example, have the resources to do both: use the scheme and apply for emergency funding,” she says.
Stone King’s Broughton stresses that any operational decisions made as the furlough scheme winds down must not have a disproportionate impact on any one part of the workforce, which could be seen to be discriminatory.
It is also vital that organisations consider the wellbeing of staff during any change management process. Broughton stresses that charities will need to consider the wellbeing of staff during any future consultation process as a result of the furlough scheme coming to an end, together with reputational risk and how decisions are communicated to stakeholders.
Garfield argues the government should be preparing to provide more support to smaller charities and local authorities: “A lot of places are going to suffer when the scheme ends.”
How furloughing two-thirds of staff helped Oxfam GB through Covid-19
At the beginning of the first lockdown, Oxfam GB announced that it would furlough two-thirds of its 2,100-strong UK workforce as a result of Covid-19.
The charity sits at the other end of the income scale to Eastside Community Heritage, reporting £367.4m in total income for the 2019/20 financial year.
The charity’s total income represented a £67m drop on the previous year, which it said revealed a challenging year on the high street and changing patterns in charitable giving.
However, making use of the furlough scheme allowed Oxfam to adapt to the rapidly changing business environment over the past 18 months, as shops reopened and closed and people’s personal circumstances changed due to new patterns of working, including from home.
“The pandemic has had a significant impact, with the closure of our shops during the lockdowns and cancellation of major fundraising events. The furlough scheme has helped us mitigate the impact of the loss of income while we have done everything we can to protect our work globally,” a spokesperson for Oxfam explains.
“The introduction of the part-time and short-term furlough options enabled us to be flexible and allowed more staff to be involved as we adapted to changing business needs like the re-opening of our shops in April and to reflect people’s personal circumstances – for example, staff with increased caring responsibilities during lockdown.”
Oxfam will continue to use the scheme until it is phased out.