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Rishi Sunak has ruled out an extension of the licensing scheme beyond October
Companies that use the government’s coronavirus leave scheme now have to contribute to workers’ wages.
Since March, the Coronavirus Job Retention Scheme has paid 80% of the salaries of licensed workers, up to a maximum of £ 2,500 a month.
But now that drops to 70%, and the employer pays 10%.
The plan is due to finalize by the end of October and Chancellor Rishi Sunak has repeatedly ruled out an extension.
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 return to.
- How is the license changing now?
Starting September 1, the government will pay 70% of salaries up to a limit of £ 2,187.50 per month. Employers are already paying contributions to employee pension and National Insurance, but now they will also have to pay 10% of wages.
In October, the government will pay 60% of salaries up to a limit of £ 1,875. Employers’ share of the bill will increase to 20% of wages.
Fear of unemployment
The rising cost of the plan poses a problem for employers, who face difficult decisions about whether to lay off staff.
Craig Beaumont of the Federation of Small Businesses told the BBC’s Today show that a million small employers across the country had used the leave scheme.
He said 23% of small employers were considering cutting their workforce in the next three months.
“This is very, very serious. That is a big section of the economy,” he said.
“Sixty percent of those who work in the private sector are working for a small business, so if that happens without any intervention, then it’s a huge increase in mass unemployment.”
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Acas has seen a huge increase in calls to its redundancy advice line
Paul Dales, UK chief economist at Capital Economics, told the program that other countries, such as France and Germany, had expanded comparable schemes.
Last week, for example, Germany agreed to extend a scheme that supplements the salary of workers affected by the coronavirus pandemic until the end of 2021.
“The UK scheme, in that sense, seems a bit short, especially when you consider that the UK economy is made up of a higher proportion of sectors that are hampered by social distancing,” Dales said.
However, he added that many jobs are currently “frozen” and will not return after the coronavirus crisis.
“You want to start the process of reassigning those people to jobs that will be available for many years,” he said.
Difficult decisions
Some businesses still suffering from the pandemic, including live music venues that have yet to reopen, are feeling the effects of the license decline.
Tristan Moffat, director of operations for Piano Works bars in London’s Farringdon and West End boroughs, told BBC Radio 5 Live that his business had 104 staff members on leave.
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The bars are still closed today, but the company hopes to reopen them in October with strict social distancing measures.
The idea is that even before clients enter the club, their temperature is taken and sprayed with disinfectant in a special tunnel.
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But that depends on lifting restrictions on singing and dancing from the public, as each venue has a six-piece band that plays music non-stop.
“If we cannot reopen in the short term, then we will have very difficult decisions ahead,” he said.
‘Masking the damage’
The imminent end of the scheme is already having an impact on the economy, analysts say.
Conciliation service Acas has said calls to its layoff advice line nearly tripled in June and July, as concerns mounted about the implications.
Susannah Streeter, Senior Markets and Investments Analyst at Hargreaves Lansdown, said: ” The cancellation of the licensing plan has been followed by announcements of significant job losses in multiple sectors, particularly travel and retail.
“Although growth has been recovering as lockdown restrictions have eased, it has become increasingly clear that the government’s job retention plan has been masking the damage caused by the pandemic to jobs and the economy. usually.
“As the plan is further reduced early next month and the government stops subsidizing wages entirely by October 31, we would expect the economic recovery to lose momentum as companies in many industries are forced to lay off more. personal”.
