Chancellor announces plans to wind down job retention scheme

Employers will be expected to pay “only a modest contribution, introduced slowly over the coming months,” said Rishi Sunak, as he confirmed his plans for the final stage of the eight-month furlough scheme

Written by Georgie Dobie

Posted 29.05.2020 | Business

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Two weeks ago, the chancellor, Rishi Sunak, said that the furlough scheme would remain open until October. He also confirmed that the Government would be asking employers to start contributing, as flexible furloughing is introduced. And he reassured furloughed employees that they would see no change to their level of support.

This evening (29 May), Sunak provided more details for his plans to reopen the country and kickstart the economy.  

Recognising that businesses and employers have been through “an incredibly difficult time“, Sunak said: “I have decided to ask employers to pay only a modest contribution, introduced slowly over the coming months. 

“In June and July, the scheme will continue as before, with no employer contribution at all. 

“In August, the taxpayer contribution to people’s wages will stay at 80 per cent. Employers will only be asked to pay National Insurance and employer pension contributions, which, for the average claim, account for just five per cent of total employment costs. 

“By September, employers will have had the opportunity to make any necessary changes to their workplaces and business practices. Only then, in the final two months of this eight-month scheme, will we ask employers to start paying towards people’s wages. 

“In September, taxpayers will pay 70 per cent of the furlough grant, with employers contributing 10 per cent

“In October, taxpayers will pay 60 per cent, and employers will contribute 20 per cent

“Then, after eight months of this extraordinary intervention, of the government stepping in to help pay people’s wages, the scheme will close.” 

Speaking of his plans for flexible furloughing, Sunak said he wanted to work with employers to help protect jobs, allowing business to decide how quickly to bring their workforce back.  

He said: “From 1 July, employers will have the maximum possible flexibility to decide on the right arrangements for them and their furloughed staff

“For instance, if you are watching at home and on furlough, your employer could bring you back two days a week. They would pay you for those two days as normal, while the furlough scheme will continue to cover you for the other three working days. 

To introduce this flexible furlough, a month earlier than planned, from 1 July, the Government will close the old scheme to new entrants on 30 June. Employers wanting to place new employees on the scheme will need to do so by 10 June to allow them time to complete the minimum furlough period before then. 

The chancellor said that its job retention scheme has now supported more than eight million jobs and over a million businesses. 

In tonight's announcement the chancellor also confirmed that the self-employment income scheme would be extended, with applications opening in August for a second and final grant. He said that 2.3 million people have now applied for the income support scheme. 

The final grant will work in the same way as the first did, paid out in a single instalment covering three months’ worth of average monthly profits. To maintain the sense of fairness alongside the job retention scheme the value of the final grant will be 70 per cent, up to a total £6,570. 

Sunak was keen to stress that the measures introduced by the UK Government in response to the outbreak of Covid-19 “have been on a scale unmatched by any government in recent history”.  

He said: “[The UK Government's] economic response to coronavirus was designed to keep people in work, protect people’s incomes, and support businesses – all to give us the best chance of recovering quickly as the economy reopens. 

“Now, our thoughts, our energies, our resources must turn to looking forward, to planning for the recovery. 

“And we will need the dynamism of our whole economy as we fight our way back to prosperity. 

Looking ahead to a new normal, Sunak said: “Not everything will look the same as before. 

“It won’t be the case that we can simply put the key in the lock, open the door, and step into the world as it was in January.” 

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