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East Midlands Chamber News

Chamber responds to furlough changes

Chancellor Rishi Sunak today unveiled more details about changes to the Government’s Coronavirus Job Retention Scheme, including plans to ask employers to contribute 20% of workers' wages, plus National Insurance and pension contributions.

The emergency scheme was launched in April to allow employers affected by the coronavirus pandemic to stand down workers rather than make them redundant, then claim a cash grant of up to 80% of their wages, capped at £2,500 a month. The scheme is currently covering the wages of around 8.4m UK workers.

Earlier this month, Mr Sunak announced that the scheme would be extended to October, with no changes until the end of July, but from August onwards, he would ask employers ‘start sharing, with Government, the cost of paying people’s salaries’.

Today, he announced that the Government will ‘taper’ the scheme over the next few months, with employers covering National Insurance and pension contributions from August, and a proportion of wages in September and October, with a view to employers paying 20% of wages by the end of October, provided the UK’s economic conditions don’t worsen.

He also announced the scheme would be closed to new applicants in June and that workers would be allowed to return part-time from July.

Scott Knowles, Chief Executive of East Midlands Chamber (Derbyshire, Nottinghamshire, Leicestershire), said: “The Government deserves a huge amount of credit for the unprecedented level of financial support it has provided to workers affected by the pandemic, to help protect jobs and businesses.

“While it was good to see the  measures the Chancellor announced today were balanced, being driven by economic outcome rather than fiscal cost and flexible enough to be varied should the economic picture change, many firms still face significant uncertainty.

“As such, while giving firms the option to bring back workers part-time is welcome, but closing the scheme to new applicants early seems premature.

“While employers will have to start contributing more in the months ahead, most will accept that the scheme is not sustainable in the long-term and cannot go on forever and with lockdown restrictions beginning to ease and the economy starting to reopen.

“Working towards transitioning workers out of furlough and back into the workplace is an essential next step. However, the furlough scheme must become more flexible if it is to help companies bring employees back to work successfully.

“While it has helped businesses to avoid millions of immediate redundancies, it must now be adapted to help firms keep as many of these jobs as possible as they reconfigure their operations to meet social distancing guidelines and start job of rebuilding the economy.”