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Furlough scheme extended

Published: 

Mon 2 November, 2020

Furlough

The timing of the announcement to extend the furlough scheme will have brought some relief too many, but what does it now mean?

The scheme was due to end on 31 October and set to be replaced by the less generous Job Support Scheme.

There were fears that the drop in financial support for businesses and employees would lead to large scale job cuts and redundancies.

These were genuine fears fuelled by the fact the coronavirus (Covid-19) pandemic had already led to news of huge job losses,

British Airways will reportedly cut up to 12,000 jobs from its 42,000-strong workforce due to a collapse in business because of the coronavirus pandemic (1)

And oil giant BP will purportedly axe about 10,000 jobs as part of plans to deal with plunging demand for fuel caused by Covid-19. The move will affect about 15 per cent of the company’s workforce, including 2,000 UK staff (2)

In an unexpected Saturday evening press conference, held on the day the furlough scheme was due to end, Prime Minister Boris Johnson revealed news of a second national lockdown.

But perhaps what took many by surprise – including us having originally written this blog on Saturday afternoon about what would happen after the end of the furlough scheme – the PM announced that furlough will now be extended until 2 December (3) .

While there were widespread reports that a second lockdown was on the way prior to the official announcement, no indication was given that there was to be a change in plan regarding the furlough scheme.

So what does the extension of the furlough scheme now mean?

Employees will receive 80 per cent of their current salary for hours not worked, up to a maximum of £2,500. This will continue up until 2 December.

Under the extended scheme, the cost for employers of retaining workers will be reduced compared to the scheme, which was due to end on 31 October.

It is claimed that this means the extended furlough scheme is more generous for employers than it previously was.

In addition, business premises forced to close in England are to receive grants worth up to £3,000 per month under the Local Restrictions Support Grant. 

Businesses have faced unprecedented challenges in the last few months and it is thought the furlough scheme helped to save many jobs and get people back to work at a critical time.

In fact the government hailed furlough as a success with Chancellor of the Exchequer, Rishi Sunak, saying it had done what it was designed to do (4).

According to figures from the Office for National Statistics about two million employees, almost one in 13 UK workers, were on the furlough scheme in the two weeks to 18 October (5). This compares with May when 8.9million workers - more than one in four - were being supported by the scheme.

It is unclear what will happen when the extension to the furlough scheme comes to an end and if it will lead to a revival of the much criticised Job Support Scheme (JSS) (6).

Had the JSS been introduced in the form it was proposed it would have meant that employees who worked at least 20 per cent of their usual hours, would have received at least 73 per cent of their wages.

Those employees will have been paid as normal for the hours that they worked. The employer was due to pay five per cent of the salary for the hours not worked, and the government would have paid the remainder of 61.67%, up to a maximum of £1,541.75 per month.

The GMB Union criticised the panned introduction of the JSS because it said it would have left millions facing winter without enough to live on (7)

In the announcement of a second national lockdown for England, everyone was advised to work from home if they can. Only keyworkers, construction and manufacturing, should go to work.

 References:

(1) British Airways will reportedly cut up to 12,000 jobs – [Internet] www.bbc.co.uk [cited 2.11.2020]  https://www.bbc.co.uk/news/business-52462660

(2) And oil giant BP will purportedly axe about 10,000 jobs  [Internet] www.independent.co.uk [cited 2.11.2020] https://www.independent.co.uk/news/business/news/bp-job-cuts-coronavirus-oil-gas-impact-a9554341.html

(3) PM announced that furlough will now be extended until 2 December  [Internet] www.gov.uk [cited 2.11.2020] https://www.gov.uk/government/news/furlough-scheme-extended-and-further-economic-support-announced.

(4) The government hailed furlough as a success [Internet] www.gov.uk [cited 2.11.2020] https://www.gov.uk/government/news/official-figures-show-that-the-furlough-scheme-has-worked-saving-jobs-and-helping-more-than-half-of-employees-back-to-work-already#:~:text=News%20story-,Official%20figures%20show%20that%20the%20furlough%20scheme%20has%20worked%3A%20saving,employees%20back%20to%20work%20already&text=At%20the%20schemes%20peak%20in,across%20the%20UK%20was%20furloughed

(5) Almost one in 13 UK workers, were on the furlough scheme in the two weeks to 18 October [Internet] www.ons.gov.uk [cited 2.11.2020]https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/conditionsanddiseases/bulletins/coronavirustheukeconomyandsocietyfasterindicators/29october2020

(6) It is unclear what will happen when the extension to the furlough scheme comes to an end [Internet] www.gov.uk [cited 2.11.2020] https://www.gov.uk/guidance/check-if-you-can-claim-the-job-support-scheme

(7) The GMB Union criticised the panned introduction of the JSS [Internet] www.gmb.org.uk [cited 2.11.2020] https://www.gmb.org.uk/news/job-support-u-turn-welcome-millions-face-winter-without-enough-live

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