On Friday (29 May), chancellor Rishi Sunak announced the long-awaited detail on his plans to wind down the furlough scheme by October. This included detail on the creation of new flexibilities allowing employees to work part time while still being eligible for furlough grants, and the introduction of employer contributions.
Sunak also used this as an opportunity to announce a “new collective national effort” to revive Britain’s economy, with details of a new job creation scheme expected in the near future.
The changes to the job retention scheme have been widely welcomed by employers and industry bodies. Peter Cheese, chief executive of the CIPD, said the introduction of the new flexible scheme “should be some encouragement for those who have been on full-time furlough”.
So what detail did Sunak announce and what will the furlough scheme look like going forwards?
Employers will be able to bring furloughed workers back part time from next month
From 1 July employers will be able to return furloughed workers on a part-time or reduced-hours basis while still claiming from the job retention scheme for the hours the employee isn’t working. This means, for example, if a worker is brought back for two days a week, the employer will pay these two days in full as usual, while continuing to claim 80 per cent of the employee’s wage cost through the furlough scheme for the other three days.
Employees need to be on the scheme by 10 June
The flexible furlough scheme will be introduced as a new scheme, with the current system coming to a close on 30 June. However, claims will be restricted to employees already furloughed before this date. This means any organisation wanting to make use of the new scheme’s flexibilities will need to have furloughed these staff by 10 June, to allow them to complete the minimum three weeks required by the current scheme before it comes to an end.
There are no new provisions for new starters
To reduce fraudulent claims, the job retention scheme included a cut-off date after which employees starting at a company were not eligible. This latest start date was pushed forward, from 28 February to 19 March, in an attempt to make the scheme more inclusive. However, this still left many employees in the lurch. New Starter Justice, a campaign group, has estimated that 1.6 to 2.3 million people had just started or were due to start new jobs when the lockdown was introduced. And while employers were allowed to rehire and furlough individuals who had left for a new job before 19 March, there was no obligation to do so.
Cheese said: “[It is] disappointing… that no provision has been made for those who started new jobs but missed the cut-off date in March and have lost out on furlough support.” He added it was something the CIPD had raised directly with the chancellor.
Employers will not have to contribute until August
The job retention scheme will continue operating as it has done since launch for the rest of June and throughout July, with the government paying 80 per cent of wages up to a maximum of £2,500 for furloughed staff. From August, the government will still cover the cost of wages, but employers will be asked to pay employer national insurance and pension contributions – which Sunak said averages about 5 per cent of total employment costs.
Torsten Bell, chief executive of the Resolution Foundation, welcomed the gradual introduction of employer contributions. However, the think tank warned that even this small contribution could push some employers into having to make redundancies. “The one-size-fits-all approach will prove tough for hard-hit sectors, even with the initially low level of employer contributions,” Bell said. “Policymakers should prepare for significant redundancies among the two million hospitality workers currently furloughed.”
From September employers will contribute 10 per cent of wages
In the penultimate month of the scheme, the government will drop its contribution to 70 per cent of wages, with employers expected to contribute the other 10 per cent (if still paying staff 80 per cent of their wages rather than topping this up to 100 per cent), on top of national insurance and pension contributions. In October, the last month of the scheme, the government’s contribution will drop again to 60 per cent and employers will need to contribute 20 per cent of wages.
The self-employed income support scheme will also be extended
Following pressure to extend this beyond its previous closing date of last weekend (the weekend of 30-31 May), the self-employed income support scheme will be opened for a second round in August. The scheme will operate in the same way; however, grants will be dropped to 70 per cent of earnings, or a maximum of £6,570, for three months to bring this in line with the new job retention scheme.
Government also to announce a large job creation scheme
While no details have yet been given, Sunak also used his address on Friday (29 May) to pledge a “new collective national effort” to revive Britain’s economy. Over the weekend, ministers told the Financial Times that Sunak and prime minister Boris Johnson were planning a big job creation scheme to address the danger of mass unemployment – focusing on upgrading infrastructure, including broadband and green energy projects. The same report said education secretary Gavin Williamson was drawing up a skills package to retrain workers, particularly the young.