Despite dire warnings regarding a “perfect storm” brewing, the government is proceeding with its plans to taper the furlough scheme beginning today. Under the revised scheme, the governments’ support towards furlough wages is dropping from 70% to 60%, up to a maximum of £1,875 per month. Additionally, today is the deadline by which employers need to issue redundancy notices to the employees they plan to lay off once the scheme ends.
The tapering of the furlough scheme is expected to put added pressure on employers to lay off millions of workers, should they be unable to meet the costs of retaining them under the present crippling economic conditions. The scheme has been a lifeline to over 9.6 million employees across the country. Employers had some relief over the past months, as the government supported up to 80% of furloughed employees’ wages, up to a maximum cap of £2,500, as well as national insurance and pension contributions.
In August, the government began to limit their contribution towards furlough payments, with employers expected to cover the cost of insurance and pension. This month, that contribution will be even further reduced, with employers expected to pay up to 20% of furloughed workers wages, as well as their aforementioned contributions.
By the end of October, the government will completely phase out the furlough scheme, replacing it with a less generous support package known as the Job Support Scheme. Under the Job Support Scheme, the government will pay up to two thirds of the wages for employees working at least a third of their regular hours. For the hours not worked, the government and employer will each pay one-third of the remaining wages, which means that a worker would get at least 77% of their wages.
While the reception to the Job Support Scheme has been lukewarm, Chancellor Rishi Sunak insists that the new scheme enables people to return to work, rather than endlessly extending the furlough scheme and keeping them idle. His “number one priority”, as he mentioned in a recent press conference, is boosting employment numbers, which he hopes the Job Support Scheme will enable.
Employment lawyer Merrill April recently commented that the Job Support Scheme may not make financial sense for certain employers. She said, "One of the conditions is that employees have to work 33% of their normal hours so, in short, employers will have to pay at least 55% of an employees’ usual wage where the employee only works 33% of their usual hours."
While one hopes that several employers may choose to retain their staff for their experience, Labour still fears that the winding down of the furlough scheme will result in a tidal wave of unemployment, as the burden of employees’ wages now falls mostly upon employers.
Research from the Labour party suggests that the latest COVID restrictions prevent over 100,000 small and medium-sized businesses, mostly in the hospitality sector, from operating at their full capacity. Millions of enterprises are still reeling from the economic shock following the pandemic, with around 310,000 of them earning less than half the amount they did over the same period in 2019. With the prospect of another lockdown looming over the winter months, these businesses will be even more tightly squeezed, creating a bleak outlook for the future of millions of jobs.