Chancellor’s huge furlough change from August sparks mass redundancy fears

Chancellor Rishi Sunak has today announced a number of new changes to the furlough scheme, including allowing staff to work part time from July 1.

Sunak said employers will also have to foot part of the bill from August, as the scheme, which has already cost the Treasury £150billion, is wound down.

But the move has sparked fears for redundancies as companies face paying staff but without trade returning.

The 80% payout will continue until July 31, after which point firms will have to start paying national insurance and pension contributions.

The payout will then fall to 70% in September, followed by 60% in August, when firms will be asked to make up the difference to 80% – or £2,500.

While this is currently optional, the Government says employer contributions will become compulsory – even for those who are unable to restart their business.

Firms will be asked to pay national insurance and pension contributions from August 1

So far, the coronavirus job retentions scheme has helped 1million employers save 8.4million jobs, Sunak said.

He added: “Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.

“We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.

“Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.”

It comes as campaigners continue to fight for an extension of the scheme as many businesses fear they won’t be able to return this summer.

Labour has now warned that the changes may cause a “spike in unemployment”.

Employer contributions are set to become compulsory

Anneliese Dodds MP, Labour’s Shadow Chancellor said: “It is welcome that the government has heeded Labour’s calls for a more gradual introduction of the employer contribution to furlough, the introduction of flexibility within furlough to allow part time working, and the extension of the self-employed scheme.

“However, it is concerning that there is no commitment within these plans for support to only be scaled back in step with the removal of lockdown.

“Nor is there any analysis of the impact on unemployment of a ‘one size fits all’ approach being adopted across all sectors.

“The Chancellor must publish the evidence behind these decisions to provide reassurance that his proposals won’t cause an additional spike in unemployment, and an even more difficult economic recovery from this crisis.”

A general view of signs and shoppers on Oxford Street
The high street will get back to business on June 15

TUC General Secretary Frances O’Grady said: “We’re glad the chancellor has listened to unions and allowed employers to start using short-time furlough from July.

“This will help employers gradually and safely bring people back to work, protect jobs and support the economy to recover. 

“As employers begin to contribute to the costs of furlough, we remain pleased that all workers will continue to receive at least 80% of their wages for every hour worked until the scheme closes in October.

“However, the government needs to act urgently to make sure workers with health conditions or childcare responsibilities aren’t first in line when it comes to redundancies.  

“The UK cannot afford the misery of mass unemployment.”

Part time workers from July 1

From 1 July 2020, businesses will also be given the flexibility to bring furloughed employees back part time.

Individual firms will be given the power to choose their shift patterns – and will be responsible for paying their wages while in work.

To enable this, employers will have to submit data on the normal amount of hours versus how many shifts they carried out.

June and July changes

From August 2020, the government grant will be slowly tapered as employees return to work

The Government will continue to pay 80% of people’s salaries up to a maximum of £2,500 until July 31.

This will include covering employer national insurance and pension contributions.

Employers can pay the remaining 20% if they are able to.

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Furlough explained

August

From August 1, the Government will continue to pay 80% of wages up to a cap of £2,500, however firms will be told to pay certain staff contributions.

Employers will have to foot the bill for national insurance and pension contributions – equivalent to around 5% per head.

September

From September 1, the Government will pay 70% of wages up to a cap of £2,190.

Employers will be told to pay national insurance, pension contributions and 10% of wages to take the total to 80% (up to a cap of £2,500).

October

From October, the Government will pay 60% of wages up to a cap of £1,875. Employers will have to pay national insurance contributions, pension contributions and 20% of wages to take the total to 80% (or £2,500).

-- to www.mirror.co.uk

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