LONDON: Companies using the government’s coronavirus furlough scheme are now having to contribute to workers’ wages.
Since March, the Coronavirus Job Retention Scheme has paid 80% of the wages of workers placed on leave, up to a maximum of £2,500 a month.
But according to a BBC report, now that is going down to 70%, with the employer paying 10%. The scheme is due to finish at the end of October and Chancellor Rishi Sunak has repeatedly ruled out an extension to it. Last month, he said it was “wrong to keep people trapped” in a situation where there was no realistic prospect of them having a job to go back to.
From 1 September, the government will pay 70% of wages up to a cap of £2,187.50 a month. Employers are already paying employees’ pension contributions and National Insurance, but will now have to pay 10% of salaries as well.
In October, the government will pay 60% of wages up to a cap of £1,875. The employers’ share of the bill will then go up to 20% of wages. The increased cost of the scheme poses a problem for employers, who face difficult decisions about whether to make staff redundant.
Craig Beaumont of the Federation of Small Businesses told the BBC’s Today programme that one million small employers across the country had used the furlough scheme.
He said that 23% of small employers were considering reducing their headcount in the next three months.
“This is very very serious. That’s a huge section of the economy,” he said. “Sixty per cent of those who work in the private sector do so for a small business, so if that happens without any intervention, then that’s a huge increase in mass unemployment.”
Some businesses that are still suffering from the pandemic, including live music venues that have not yet reopened, are feeling the effects of the furlough tapering.
Tristan Moffat, operations director of the Piano Works bars in London’s Farringdon and West End districts, told BBC Radio 5 live that his business had 104 members of staff on furlough.
The bars are still closed at present, but the company is hoping to reopen them in October with strict social distancing measures in place. The idea is that before customers even enter the club, they will have their temperatures taken and be sprayed with disinfectant in a special tunnel.