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Millions of jobs at risk as furlough lifeline nears end

05-10-2020

The countdown to the end of the furlough financial lifeline has begun, with employers facing increased costs amid a warning that millions of jobs now hang in the balance.

From Thursday, the government's contribution to furloughed workers' wages falls.

It is also the deadline for some firms to issue redundancy notices before the furlough scheme ends on 31 October.

The current scheme is being replaced by a less generous jobs support package.

Labour claims that as a result of the government's "flawed" support, almost three million people working for small businesses are at risk of losing their jobs.

New analysis from the party says that at the start of September an estimated 2.8 million workers in small and medium size firms (SMEs) were furloughed under the current Coronavirus Job Retention Scheme (CJRS).

Since then new Covid restrictions have been imposed that mean 133,055 SMEs - including in the hospitality and events sectors - cannot operate or are trading at reduced capacity, it says.

More than a million SMEs are still suffering a fall in turnover, with about 310,000 making less than half the amount they did over the same period last year, the analysis claims.

Changes coming into effect on Thursday, along with other cost increases for employers, were announced in July.

The government's contribution towards furlough wages is dropping from 70% to 60%, up to a cap of £1,875 a month. And employers have to pay a minimum of 20% of wages, bringing monthly earnings to at least 80% of salary.

In August, employers were required to meet the cost of pension contributions and National Insurance for employees placed on the scheme.

There are also fears that the winding down of the furlough scheme could trigger a new wave of redundancies.

Thursday is the deadline for employers to issue redundancy notices if they are planning to lay off between 20 and 99 workers before the scheme ends.

The replacement jobs support scheme shifts more of the financial burden away from the taxpayer and on to employers. But the aim is to subsidise staff to work reduced hours so that employers resist mass redundancies.

Critics say it will be more expensive to bring back furloughed workers.

Sonia Hawkins, who runs Disco Equipment Hire, a music and lightening rental service for the entertainment industry, told the BBC the numbers just do not add up.

She said: "We have next to no income. We've got people on furlough. We would have to bring them back and pay them just to get a subsidy. It's nuts."

Employment lawyer Merrill April, from CM Murray, acknowledged that the new jobs support scheme would not make much financial sense for some employers.

She told the BBC: "One of the condition 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."

However, she said that many firms supported the new scheme and would not rush to cut jobs. Redundancy is expensive, she said, adding that many firms would want to retain people and skills for as long as possible.

The British Chambers of Commerce (BCC) said it was a critical time for employers, with its members facing cash flow difficulties ahead of what was likely to be a challenging winter.

BCC co-executive director Claire Walker said further support may be needed.

"As the Jobs Support Scheme replaces the furlough scheme, and employers are asked to pay more towards staffing costs, the government must stand ready to offer further support to businesses who may be unable to cover their contribution due to continued restrictions and reduced demand."

Source: BBC News