Employers ‘not convinced’ by Sunak’s job retention bonus

8 Jul 2020 By Francis Churchill

Chancellor’s spending package met with lukewarm response as experts say extending furlough scheme would be a ‘more effective’ use of public funds

The announcement of a new package of coronavirus support measures by the chancellor has received a lukewarm welcome from business groups, with many warning more is needed to avoid large-scale unemployment.

In his summer statement today (8 July), Rishi Sunak unveiled a number of measures aimed at helping to restart the economy after lockdown and encourage employers to bring staff back from furlough.

These include a new ‘job retention bonus’ that will see employers receive £1,000 for every furloughed worker still in employment by January; a £2bn 'kickstart' fund that will fund six-month job placements for young people at risk of long-term unemployment; and grants for employers that make new apprenticeship placements available.

Addressing parliament, Sunak reiterated that there would be no further extension to the furlough scheme, which is due to end in October after a period of tapering, and warned leaving the scheme open would give “false hope” that it would be possible for workers to return to the jobs they had before the crisis.

“The longer people are on furlough, the more likely it is their skills could fade, and they will find it harder to get new opportunities,” he said, adding: “While we can’t protect every job, one of the most important things we can do to prevent unemployment”.

But Peter Cheese, chief executive at the CIPD, said he was “not convinced” the job retention bonus would incentivise employers to bring back furloughed workers in greater numbers than they had already planned.

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“A simpler way of protecting jobs, and especially those of younger people, would be to extend the job retention scheme for key sectors such as hospitality and leisure beyond October,” said Cheese, adding it would be a “more effective use of public funds”.

Frances O’Grady, general secretary of the TUC, also called for more targeted support for struggling sectors, including manufacturing and aviation: “Mass unemployment is now the biggest threat facing the UK… Struggling businesses will need more than a one-off job retention bonus to survive and save jobs in the long term.”

This latest set of announcements may have come too late for businesses, many of which have already made plans around headcount in time for the introduction of the flexible furlough scheme, which started on 1 July.

“A lot [of employers] have not taken advantage of the flexible furlough scheme because of the high administrative burden,” said Ranjit Dhindsa, head of employment at Fieldfisher. “Offering the bonus now with only three weeks to go in July and a further tapering of the furlough scheme [in August]... the £1,000 might not be enough,” Dhindsa said.

Keeping employees on until January in order to be eligible for the furlough bonus could also prove difficult for some organisations, she added: “A lot of employers can't plan that far ahead yet.”

However, Sunak’s 'kickstart' scheme was met with more optimism. “We expect this scheme to be popular for businesses in all industry sectors, not just those worst affected by the lockdown restrictions,” said Ed Hussey, director of people solutions at Menzies, adding that the funding for new apprenticeships was also welcome.

Cheese described the scheme as a “bold measure”, but cautioned that employer engagement would be critical to its success. “Similar schemes in the past have floundered as employer pick up was low or largely limited to low-paid opportunities in the public or charitable sectors,” he said. “This scheme may face similar difficulties.”

“Strong support” would also be needed to prepare young people on placements for when the scheme’s funding ended, as there are no job guarantees, and Cheese also called broadly for the government to invest in life-long learning.

O’Grady also described the kickstart scheme as “a good first step”, but said more money should have been put towards job creation. “The government should have announced extra investment in jobs across all public services – starting with filling the 200,000 vacancies in the NHS and social care,” she said.

“If the chancellor wants people to have the confidence to eat out, he should have announced a pay rise for hard-pressed key workers, rather than dining out discounts for the well off,” O’Grady added, referencing Sunak’s additional plans to subsidise some restaurant meals eaten in by 50 per cent, up to a maximum of £10 a head, in order to support the struggling hospitality sector.

And Neil Carberry, CEO of the Recruitment and Employment Confederation (REC), was more positive, describing both the employee retention bonus and the kickstart scheme as “good ideas”, but expressed disappointment there was still no indication as to when the government would start sanctioning all workers to return to the workplace, and not just those who can’t work from home.

“Many firms want to know when the government will feel able to boost employee confidence by switching from working from home if you can, to going to work if it is safe,” he said.

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