Over the weekend (31st October 2020), Prime Minister Boris Johnson announced the Government’s intention to continue the furlough scheme for one extra month.
Due to the Government’s recent announcements concerning a new national lockdown for England, the Prime Minister has also stated that the furlough scheme will continue over this period too.
With the national lockdown coming into effect on Thursday 5th November, this has also altered the Chancellor’s plans to instate the Job Support Scheme from 1st November, a replacement for the furlough scheme.
Under the new restrictions, all pubs, restaurants, gyms and non-essential businesses will be forced to close over the four-week lockdown. However, schools, colleges and universities will be allowed to stay open.
Due to this, the furlough scheme will continue to operate until the beginning of December which will see employees receiving 80 per cent of their current salary for hours not worked, up to a maximum of £2,500 a month. As part of this, businesses can choose to bring back furloughed employees part-time or furlough them full time.
As an extension of the current scheme, the Government announced that the cost for employers to retain current workers will be reduced. In addition, for the furloughed workers brought back, employers will only be asked to cover National Insurance and employer pension contributions which is around 5 per cent of total employment costs.
Additionally, business owners that have been forced to close due to national restrictions are eligible to receive grants worth up to £3,000 per month under the Local Restrictions Support Grant. On top of this, local authorities are being given £1.1 billion which will be distributed £20 per head in one-off payments which the Government hopes will allow them to support businesses more broadly.
Based on September statistics, it was reported that around two million people remained on furlough during the month of October. Figures from HMRC show that, throughout the furlough scheme until September, 9.6 million jobs were furloughed, affecting millions of employers nationally.
Reacting to news of the extension of the furlough scheme, Dame Carolyn Fairbairn, Director-General of the Confederation of British Industry (CBI), said:
Lockdown is a decision for government, not business, and firms share the Prime Minister’s ambition to defeat the virus. But for many businesses, a second national lockdown marks the start of a bleak midwinter
With the right support, firms will do everything possible to minimise the damage. Across the country they have already shown how resilient they can be in the face of tighter restrictions. And thanks to huge efforts by businesses to make workplaces Covid secure, more of the economy can now stay open.
Extending furlough is a vital step. It will bring instant relief and protect jobs. It’s also a breakthrough to hear government support for rapid mass testing. Affordable fast tests are a game-changer for business, enabling more firms to stay open and operate normally. We must use this lockdown month to prepare and roll-out mass testing as a matter of national urgency.
However, some sectors may need more tailored support in the coming weeks.
It’s also clear that communication needs to improve. Firms can’t plan on the basis of speculation. Formal business involvement in lockdown planning is now urgently needed, matched by coordination with devolved nations to minimise confusion and build confidence.
Heather Self, tax partner at Blick Rothenberg, a tax and advisory firm, said:
Employers are supposed to agree any changes to employees’ contracts in advance – how are they supposed to do that at 6 hours’ notice at a weekend?
While it is welcome news that additional support is being offered to businesses during the new lockdown restrictions, the change may well come too late to save jobs.”
The Chancellor repeatedly said that the furlough scheme would not be extended, but has now done a last-minute U turn and has postponed the job support scheme for at least a month. The extension is more generous, but the very short notice is a Halloween nightmare for employers and jobs that could have been saved may now be lost.
Businesses need to be able to plan ahead through the winter and into 2021. We urge the Chancellor to set out a plan to support businesses in the months ahead, rather than reacting on a week by week basis to changing circumstances.
Kate Palmer, HR Advice and Consultancy Director at Peninsula UK, added:
Employers should use the remaining days until the lockdown begins to speak to employees about the impact of the lockdown and get agreement to furlough so that redundancies can be avoided, but should be aware that more flexibility has been built in to the rules.
Employers can use furlough for the first time and can furlough employees who have not been furloughed before provided they began working and had been paid at least once, by 30 October. No employer contribution to wages is needed for unworked hours; grants will be set at 80% of wages to a maximum of £2,500 per person per month which means that wage assistance has increased.
However, full guidance is yet to be published, so we are still waiting for the full picture. As we have seen several times in recent months, the rules can, and do, change very quickly.