What is the new local furlough scheme and how will it work?

People Management provides the lowdown on what we know so far, details of the proposed three-tier system, and who is likely to be impacted by new restrictions

Chancellor Rishi Sunak is expected to announce a limited extension of the furlough scheme today (9 October), through which the government will offer financial support for businesses that have been forced to close to stop the spread of coronavirus.

Sunak will outline new support for people and businesses in areas expected to face new restrictions next week, which will include the closure of pubs, bars and restaurants, as part of a three-tiered lockdown system to stop hospitals being overwhelmed by a surge in Covid-19 cases. 

A Treasury spokesperson confirmed: “The chancellor will be setting out the next stage of the job support scheme later today, that will protect jobs and provide a safety net for those businesses that may have to close in the coming weeks and months.” 

So what can employers expect from the chancellor’s announcement later today?

What is being proposed? 

The new scheme is expected to pay two-thirds of workers’ wages for businesses that have been told to close. This makes it more generous than the job support scheme announced last month, which subsidises a fifth of part-time wages, but less generous than the original furlough scheme, which subsidised 80 per cent of people’s wages.

However, Steve Rotheram, metro mayor for the Liverpool City region, said support on a “similar scale” to the original furlough scheme was needed, adding that “if it was right then, it certainly is now”.

The scheme is expected to last as long as businesses are shut down.

Why is this coming into force?

The announcement comes amid growing concern that hospitals in the worst-hit parts of England could be overwhelmed by a rise in Covid-19 cases, and run out of beds within weeks.

In response to the number of cases, the government has proposed local lockdowns and tougher restrictions, such as business closures, to contain the spread. It also expects to announce a new three-tier system for local lockdowns next week in an attempt to codify the rules across England. This announcement has been met with opposition from civic leaders in northern England, which has been disproportionately impacted by the virus, with them calling for the restrictions to come with significant financial support.  

The mayor of Greater Manchester, Andy Burnham, has threatened to take the government to court in a bid to stop the measures being introduced without “proper compensation and a local furlough scheme for staff”. Meanwhile, general secretary of the Trades Union Congress (TUC), Frances O’Grady, said the government “must act to preserve jobs and stop family firms going to the wall through a new local furlough scheme”.

What is the three-tier system? 

The new system of restrictions will divide England into three tiers of severity, which will encompass local lockdowns set to be enforced on Monday (12 October). Currently, more than 50 areas in England are under an array of differing local lockdown rules; the new three-tier system would standardise these depending on which tier an area falls under. Each part of England would be placed under the appropriate tier, depending on the local severity of the virus, and could move up or down depending on the rate of infection.

It is expected that tier one would use the current national restrictions, including the rule of six and 10pm pub curfew. Tier two would feature all the restrictions in tier one, but also a ban on people from different households mixing indoors. The strictest third tier would see business closures, including pubs, restaurants and leisure facilities. People affected by tier three would be expected to stop social contact with anyone outside their household, in any setting. But the third tier will also benefit from the proposed financial compensation package.

Details of the scheme are expected next week.

Who is likely to be locked down?

Reports suggest that tier three areas could include Manchester, Liverpool, Newcastle and possibly Nottingham, but it is unclear if that will mean just inner city areas or the wider regions.