Many firms will ‘fall between the gaps’ of furlough extension, say experts

As the government prepares to outline new local lockdown rules, the CIPD warns employers may miss out on both the new job retention scheme and job support programme

Many employers could “fall between the gaps” of the extended furlough scheme, experts have warned, as businesses wait to hear how they could be affected by a new tiered lockdown system, to be announced this afternoon.

On Friday (9 October), chancellor Rishi Sunak outlined an extension to the job retention scheme to support UK employers that could be forced to shut their doors over the winter because of coronavirus restrictions.

Under the scheme, the government will pay two-thirds (67 per cent) of employees’ wages – up to a maximum of £2,100 per employee per month – for businesses that are legally required to close. Unlike the current scheme, employers will not be required to contribute any wages. However, they will have to pay national insurance and pension contributions where applicable.

The scheme begins on 1 November and will be open for six months. But payments will be made in arrears and businesses will have to wait until early December to claim.

The new scheme was welcomed by Ben Willmott, head of public policy at the CIPD. But, he warned, many companies requiring support over the winter months might still miss out. 

“This only applies to businesses that are required to close down, and there’ll be lots of firms that won't be required to close but might see demand collapse as a result of local lockdown restrictions,” he said, adding: “I think there might well be a gap for those employers.”

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Willmott also warned that the extension of the furlough scheme, which will run parallel to the job support scheme announced last month, could prove confusing for some employers. “I think there is a real risk that lots of employers with real legitimate need that are affected by the restrictions imposed as a result of the pandemic will fall in the gap between the two schemes,” he said, explaining that while the furlough scheme risked being “too narrow” in only applying to firms required to close, the job support scheme was “possibly too broad” and didn’t provide enough support for those organisations needing it.

Torsten Bell, chief executive of the Resolution Foundation, also welcomed the extension of the furlough scheme, but cautioned that the delay in the announcement – which came just a few weeks before the original scheme was due to end – would come at a high cost in terms of the uncertainty facing employers. 

“It has been clear for some time that this form of a more sectorally and geographically targeted furlough scheme would be required to see us through a difficult winter. The delay in putting it in place will have come at a high price in jobs lost,” he said.

Think tank the Institute for Public Policy Research (IPPR) has estimated the extension of the scheme would only protect some 230,000 of the two million viable jobs it said would be put at risk when the scheme as it exists now closed at the end of the month. Welcoming the extension for businesses forced to close over the winter, Clare McNeil, associate director of the IPPR, still criticised the job support scheme for not doing enough to support jobs.

“But a far larger number of people are being abandoned by the government [because of] the flawed design of the job support scheme,” she said. “We estimate that only one in 10 workers in viable jobs will be supported by this scheme. What we need is a part-time work subsidy that avoids mass redundancies while allowing more employees to keep their jobs on fewer hours.”

Willmott, while recognising the challenges faced by the government, said Europe could provide inspiration for how the UK could better support businesses. “In Germany, they have an established wage subsidy system that employers understand and which can be tweaked by policymakers to change the criteria under certain circumstances,” he said. “We need something similar in the UK so we have a system that employers can understand and we’re not continuously seeing new schemes designed at very short notice.”

The extension of the job retention scheme came as the government prepared to introduce a new three-tiered local lockdown system, with details announced later today (12 October). It is expected that tier one, medium, would signify restrictions in line with those currently in place nationally, including the rule of six and 10pm pub curfew. Tier two, high, would feature all the restrictions in tier one, but also a ban on people from different households mixing indoors.

The strictest third tier, very high, would see business closures, including pubs, restaurants and leisure facilities – with affected firms eligible for the extended furlough scheme. People affected by tier three would also be expected to stop social contact with anyone outside their household, in any setting.