On the 12th May 2020, the chancellor, Rishi Sunak, announced that the UK’s Job Retention Scheme will be extended by 4 months to the end of October 2020- great news for the 7.5 million people and over 1 million businesses currently covered by the furlough scheme, but the extension brings with it some changes from August onwards.
Workers will continue to receive 80% of their wages up to a limit of £2500 per month and the scheme has been extended in the nick of time to stop companies running any 45-day consultation periods to cut 100 jobs or more as the 18th May was the last date that employers could start this necessary process ahead of the scheme’s original end date in June.
The changes to the scheme have not been clearly laid out in detail just yet which is causing considerable anxiety among business owners who have simply been warned of their requirement to ‘contribute’ towards the scheme from August onwards.
Changes to the Scheme
The scheme as it stands is costing £14billion a month but, from August onwards, businesses will be asked to ‘start sharing’ some of the cost. There will also be less rigidity imposed with employers able to bring workers back on a part-time basis from then onwards.
The reference to ‘sharing the cost’ has not been fleshed out with any details as yet, but it is said that Mr Sunak will ‘attempt slowly to reduce the cost to the taxpayer of the subsidy scheme’.
According to the BBC, the Treasury still expects to be paying ‘more than half the costs between August and October’.
Shadow chancellor Anneliese Dodds has said that “the big elephant in the room” is over what the government’s employer contribution will involve, adding that the “critical point is that any changes to the scheme must not result in any spike in unemployment”.
Speaking in the Commons, Mr Sunak said “Our message today is simple: we stood behind Britain’s workers and businesses as we came into this crisis, and we will stand behind them as we come through the other side.”
Businesses, while grateful for the scheme, need more clarity before breathing a sigh of relief.
When can we expect the details?
More details surrounding the percentage contribution companies will be expected to make are due to be released by the end of May so keep an eye on the government website.
The government will also look at ways in which furloughed workers can be supported to complete training or learn new skills while they’re not working- again, with details to follow.
A word from the experts:
“The Job Retention Scheme is a lifeline which has been hugely beneficial in helping small employers keep their staff in work, and it’s extension is welcome. Small employers have told us that part-time furloughing will help them recover from this crisis and it is welcome that new flexibility is announced today.”Mike Cherry, National Chairman of the Federation of Small Businesses
“Over the coming months, the government should continue to listen to business and evolve the scheme in line with what’s happening on the ground. Further support may yet be needed for companies who are unable to operate for an extended period, or those who face reduced capacity or demand due to ongoing restrictions.”BCC Director General Adam Marshall
“As economic activity slowly speeds up, it’s essential that support schemes adapt in parallel. Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs. Introducing much needed flexibility is extremely welcome. That’s essential as the UK economy revives step-by-step, while supporting livelihoods. Firms will, of course, want more detail on how they will contribute to the scheme in the future and will work with government to get this right. All schemes will need to be kept under review to help minimise impacts on people’s livelihoods and keep businesses thriving. The greater the number of good businesses saved now, the easier it will be for the economy to recover.”Dame Carolyn Fairbairn, CBI Director-General