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COVID-19: Should Nigeria’s Government Pay for Employees on Furlough?

The coronavirus pandemic has forced numerous businesses across the world to close shop. Some won’t be reopening after the crisis. Their workers will have to look for a new job once the present troubles subside.

Other companies are riding through the storm. A number of them are staying alive by placing their employees on furlough.

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There’s been a spike in the use of the word ‘furlough’. It’s one of those terms that are shot through from oblivion and into our daily conversations in these times. But not many people know what it means.

So here’s a little primer.

A furlough is a temporary period of unpaid leave. Companies can ask their workers to go on furlough if they can’t pay their salaries for a while.

This is different from a layoff. When people get furloughed, they are still on their employer’s payroll, though they don’t get paid while they are off work. The company they work for can still recall them when conditions allow this. But if they are laid off, they are taken off the payroll, and won’t be recalled.

How Does a Furlough Work?

Ideally, a company should inform its employees before it places them on unpaid leave. If the company exempts certain roles, it should specify them in its communication with workers. Those excluded from furloughs should be paid for the work they do.

An organization should implement this measure as part of a collective effort to save costs. If you’re asking some employees to go on unpaid leave and paying bonuses to senior management at the same time, your actions may come across as insensitive.

The Role of Government in Various Countries

All over the world, millions of employees have had to go on furloughs. But some governments have also stepped in to ensure that they’re still getting paid.

In the United Kingdom, the government has guaranteed up to 80% of monthly wages for workers who have been placed on unpaid leave. And in the US, there’s a $367 billion employee retention fund for small businesses that lets them cover more than two months of payroll.

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Similar measures have been announced in Australia, Canada, Denmark, France, and Sweden. Less robust interventions have been promised in China.

Should Nigeria’s Government Consider Payments to Furloughed Employees?

Many businesses have asked their employees to take salary cuts. Others have suspended salary payments altogether, for the time being. Should the government intervene to pay these workers’ salaries?

Presently, government aid to private enterprise has come in the form of low-interest loans, delayed tax filing dates, and moratoriums on loan repayments. There’s no sign that direct payments to idled employees are being considered.

We could insist that such a package is in order for Nigeria, as a lot of its private-sector workers are presently unengaged. If they get the sort of aid their counterparts in the US and UK are receiving, they will be better able to bear the financial weight they currently struggle with.    

Whether Nigeria can afford this depends on the state of its finances. It also depends on the number of people who have been forced out of work by the current disruption. Due to the fall in oil prices, the country may struggle to pay the bill for such a program, if it were enacted. The Federal Government is already slashing its budget for the year 2020.

If there’s room for a limited intervention, the government could guarantee payments to employees based on specific criteria. This should ensure that there’s a lifeline for at least the most severely affected workers. 

Furloughs are a cost-saving measure for businesses, but they are also costly for the employees affected. If the government can afford an intervention without jeopardizing its books, it could consider supporting workers with the funds they need to get through unpaid leave.

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Ikenna Nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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