Furlough scheme extended until end of October, adding rule changes in August

Chancellor Rishi Sunak today extended the Coronavirus Job Retention Scheme until the end of October, with new options for a part-time return to work from August 1 the subject of confusion in the business community.

“The scheme will continue in its current form until the end of July and the changes to allow more flexibility will come in from the start of August,” said a government spokesperson. “More specific details and information around its implementation will be made available by the end of this month.”

New statistics published by the government today (May 12) reveal the job retention scheme has protected 7.5 million workers and almost 1 million businesses through its furlough payments. However, the first phase of the scheme will draw to an end in July and on August 1 a new phase of the furlough scheme commences - and how exactly it will operate remains uncertain.

There are two new factors which kick in after August 1. Firstly, the government will expect employers to contribute towards the cost of the furlough scheme by paying a percentage of the wage - but how much and how it will be paid has not been identified.

Second, under the current scheme furloughed employees cannot work, but from August 1 they will be able to go back to the workplace part-time, assuming that if they choose to do so - and assuming it will be a choice rather than a legal obligation - appropriate safety procedures are in place.

John Bridge, chief executive of the Cambridgeshire Chambers of Commerce, responded positively to the news, saying: “The extension of the Job Retention Scheme until October will come as a huge help and a huge relief for businesses across the UK.

“It is both good news for businesses and households. It’s also sound economics. Focusing on livelihoods when the future scope of permitted activities is uncertain is the right way to bolster the economy. It also supports public health: evidence from around the world is that compliance with restrictions is influenced by loss of income and the fear of it. Our Chamber called for this in the first phase of the British Chamber economic recovery plan – Restart. The future of individual businesses being able to support the UK economy and making it bounce back stronger is the focus of all we are continuing to do.

“The Chancellor is once again listening to what businesses have been saying conveyed through the Chamber and the changes planned will help businesses bring their people back to work through the introduction of a part-time furlough scheme. It is important to continue to engage with the Treasury and HMRC on the detail to ensure that this gives companies the flexibility they need to reopen safely.”

The main concern about the scheme after August 1 is that the employer will pay part of the 80 per cent currently being paid by the government - and the employer may expect a worker to return to work part-time for that contribution. Asked about this possibility, Mr Bridge replied: “We don’t know the answer to that. We’re in discussions with the Treasury at the moment, and there’s been discussions behind the scenes on how it will work for both part-time work and how the government shares costs with the employer.”

The Chamber is part of the ‘Big 5’ business organisations in the UK currently talking to the Treasury. The others are the Confederation of British Industry, the Federation of Small Businesses, the Institute of Directors and MakeUK (formerly the Engineering Employers’ Federation).

Chancellor Rishi Sunak said: “Our Coronavirus Job Retention Scheme has protected millions of jobs and businesses across the UK during the outbreak – and I’ve been clear that I want to avoid a cliff edge and get people back to work in a measured way.

“This extension and the changes we are making to the scheme will give flexibility to businesses while protecting the livelihoods of the British people and our future economic prospects.”

Dame Carolyn Fairbairn, CBI director-general, said: “Introducing much needed flexibility is extremely welcome. It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation. That’s essential as the UK economy revives step-by-step, while supporting livelihoods.

“The greater the number of good businesses saved now, the easier it will be for the economy to recover.”