New Employment Plan Unveiled By Sunak To Replace The Furlough Scheme

Daniel Fowler
September 26, 2020

"The Chancellor would have been better to scrap the expensive Job Retention Bonus and used the money saved to create a genuine short-hours working scheme that would keep many more workers in jobs over the hard months to come".

Sunak said it is created to help businesses keep employees in a job on shorter hours rather than making them redundant.

Pete Watson, chief executive of Newcastle-based Atlas Cloud said the measures were a missed opportunity and more could be done to create longer-term more sustainable jobs and to better support the United Kingdom economy.

Steve Nash, CEO of the Institute of the Motor Industry (IMI), also said the scheme would be welcomed by businesses in the automotive sector who face the enormous challenge of delivering a quality service whilst managing costs in the face of reduced turnover.

Together with the other ongoing job protection schemes such as the kickstart scheme, retention bonus, and trainings, the United Kingdom government remains committed to safeguard millions of jobs, said Sunak in his winter economy plan speech.

To be eligible under the new scheme, employees must be on a PAYE payroll on or before 23 September. "When German businesses were given flexibility under their wage subsidy scheme, the result was successful with millions of jobs being saved".

This means employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can't work.

Britain's unemployment rate rose to 4.1% in the three months to July with 1.4 million out of work, and the BoE forecast last month it would jump to 7.5% by the end of the year if there was no replacement for the existing furlough scheme.

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For example, on the scheme, if a worker who is normally paid £2,000 a month worked half their hours, their employer would have to pay £1,000 for the hours they have physically worked, plus £333 that the employee has not worked - with the government chipping in a further £333 to the employee, and the rest of the wage being left unpaid.

Pension contributions will remain the responsibility of the employer and will not be supported by the government's scheme.

The scheme is being phased out and will end next month, leading to fears of a spike in unemployment.

This falls considerably short of the furlough scheme - the Treasury's contribution is capped at £698 a month. Large businesses will be required to demonstrate that their businesses has been "adversely affected" by Covid-19, and should not be paying dividends or making other capital distributions while using the scheme. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.

Finance minister Rishi Sunak also unveiled plans to extend loan repayments for businesses and delay ending a tax cut for the hospitality sector that has been drastically hit by coronavirus restrictions.

Bounce Back Loans can now be extended from six to ten years and businesses who are struggling can now choose to make interest-only payments. "With the United Kingdom remaining in crisis mode as coronavirus cases rise, ongoing, flexible financial support for businesses will be essential until the economy recovers".

A woman wears a protective face mask as she shops at a market amid the spread of the coronavirus disease in Brixton, London, United Kingdom [File: Hannah McKay/Reuters] Sunak said he was concerned the furlough programme allowed UK employers to preserve some jobs that were no longer needed as the economy adapts to a post-pandemic world.

This funding has helped ensure the procurement of PPE for frontline staff, provided free school meals for children while at home and protected the country's most vulnerable. This gives Scotland, Wales and Northern Ireland the budget certainty to for coronavirus response in the months ahead.

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