Following the recent announcement that the coronavirus job retention scheme would be extended up to the 31st October 2020, but with employers sharing the cost from the 1st August 2020, The Times is now reporting that the amount that employers will have to pay is between 20-30% of furlough wages.
The Coronavirus Job Retention Scheme
Under the coronavirus job retention scheme, an employee is ‘furloughed‘, which means that whilst the employee is not working, they remain on the company’s books to be brought back when required. Moreover, the Government provides employers with a grant under which 80% of furloughed employees’ wages are paid, up to a maximum of £2,500.00 per employee per month. The scheme will run from the 1st March 2020, up to the 31st October 2020, but with employers starting to shares the costs from the 1st August 2020.
Employers Contribution From 1st August 2020
On the 23rd May 2020, The Times reported that: "The Treasury has drawn up plans that would require employers to cover between 20 and 30 per cent of people’s wages, [and employers]....would also be required to cover the cost of employer’s national insurance contributions, on average 5 per cent of wages."
Nevertheless, at the same time as employers are required to start sharing the costs of the job retention scheme, from the 1st August 2020, employers will be able to bring employees back to work part time whilst still remaining in furlough.
It has been estimated by Bloomberg Economics that the cost to the taxpayer of the coronavirus job retention scheme up to 31st October 2020, could be as high as £84 billion. However, should employers be required to pay 20% - 30% of furlough salaries plus national insurance contributions from the 1st August 2020, then that would reduce the cost to the taxpayer significantly.
The chancellor of the exchequer, Rishi Sunak, is expected to make a formal announcement as to the precise rate of the employers contribution next week.
According to The Times, a Treasury source told them that: "We’ve got two full months of support left and afterwards the government will help to pay people’s wages, but it’s fair to everyone that businesses contribute as they get back to work."
Fears Of "Addiction" And Mass Redundancies
There were reports in The Sun that some within the Government are worried that some are becoming "addicted" to the job retention scheme. One "senior government source" was quoted as saying: “People are addicted to the scheme. We’re not talking about a cliff-edge but we have to get people back to work.”
Nevertheless, at the same times, there are worries that once employers have to start sharing the costs of the job retention scheme from the 1st August 2020, that companies will start making many of their furloughed staff redundant. Indeed, the Daily Mail reported that: "The effect of the change could be substantial, with several firms saying they will not be able to pay the share because their employees won't be back at work. One unnamed employee in an office based in London said that 35 out of 42 staff placed on furlough at the beginning of April would be made redundant by the end of June, while another's employer said that once it had to pick up some of the tab, people would have to go."
