Since the start of the coronavirus pandemic, the government has taken significant steps to try and protect the jobs of millions of workers across the UK. Between April and August of 2020, some 9.6 million people were placed on the government’s furlough scheme. As this scheme begins to wind down, it will be replaced by a new job support scheme which will begin on 1st November and will last for six months.
Whilst the new scheme may be welcomed by some businesses, it isn’t as far-reaching as some would have predicted or hoped. It is not surprising that the government has been careful not to label this as an extension of the furlough scheme because it works in a fundamentally different way.
Unlike the present furlough scheme where many businesses have claimed up to 80% of staff salaries back from the government, the new scheme means that employers must not only pay staff their full salary for all part-time hours worked but also contribute to staff wages for hours they do not work as well. The government will also contribute to the loss in income but, unlike its predecessor, this is capped under the new scheme at £697.92 per month.
This is the Achilles’ heel with the new scheme. In order to benefit from the scheme, companies must pay staff to stay at home. Many businesses will simply not be able to meet this commitment, particularly given falls in their revenue over the last 5-6 months. For an employee working half of their normal hours, it means that their employer will need to still pay 67% of their full-time income. This is simply not a viable solution for many whose businesses are already on a knife edge.
It also fails to tackle the issue of sectors, such as the arts, whom have not been able to operate at all. With many months to go before many of us can even begin to contemplate returning to live venues and theatres, the measures, unveiled last week as part of the Chancellor’s Winter Economy Plan, clearly show that one size will not fit all.
It will be a welcome step for some SME’s who will face uncertainty with trade over the coming months and the effect of potential intermittent lockdowns. Pub and restaurants, for instance, may benefit from the new scheme as they are already operating under reduced hours due to restrictions imposed on them such as the 10pm curfew. The retail and nursery sectors are other areas that are likely to benefit from the Scheme.
However, a lot of businesses have had to make tough business decisions already; it has been made very clear for some months that there would be no extension to the furlough scheme. Many have been compelled to make redundancies as they could not wait and are now operating on the thinnest of margins. For those that are still yet to make any decisions, the level of salary they must pay under the new scheme simply may not be enough for them to turn the tide.