Furlough – how far will it go?

The furlough scheme was introduced to the British public in March of this year to aid people who were directly affected by businesses shutting down due to the Covid-19 pandemic. This scheme was due to end on 31st October; however, a second national lockdown, announced on 31st October, resulting in the scheme being extended. Therefore, the new Coronavirus Job Retention Scheme (CJRS) will commence from 1st November and will later be reviewed six-months from this date.

In terms of businesses such as in the hospitality sector, the BBC’s report from 23rd October stated that staff of pubs and restaurants who were previously hit by the tier two rules are among those who could potentially benefit. However, the month-long lockdown results in this sector shutting down, leaving them at great risk of suffering. In the case of closure, workers will be paid 67% of their wages, this will be up to a maximum of £2,100 a month through the Job Support Scheme (JSS). Originally, you must be off work for a minimum of seven days to be eligible for this funding, this may be subject to change following the announcement of the second national lockdown.

Additionally, businesses who can be open but only have work for employees to return to work part-time can also access support under the JSS. In this case, the employee would get at least 73% of their salary. The maximum contributions that would be made by the government is £1,541.75, as reported on the BBC (23rd October 2020).

When the furlough scheme was due to finish on 31st October, it was going to be replaced by a slightly less generous job support scheme. The Labour party has stated that this is because of the government’s “flawed” support, as reported in the BBC’s article from 1st October. Almost 3 million people who work for or run small businesses are at risk of losing their jobs or their company. A recent analysis from the party observes that at the beginning of September, an estimated 2.8 million workers employees in small and medium size companies (SMEs) were furloughed under the Coronavirus Job Retention Scheme (CJRS).

Since then, new Covid restrictions and a second national lockdown have been imposed, meaning that over 133,055 SMEs, and especially those in the hospitality and entertainment sectors, cannot operate at all or are trading at a reduced capacity. The national lockdown as of 5th November means that hospitality, entertainment, and many other sectors must close until 2nd December, therefore meaning the SMEs of these sectors will suffer. During this lockdown, you must only leave the house for essential work, educational purposes, and essential food items. Construction, maintenance, schools, universities, and colleges will all remain open during the period.

Currently, more than a million SMEs are still suffering a fall in turnover from the first lockdown, with around 310,000 making less than half of the amount that they made over the same period in 2019. The government’s contributions towards furlough is due to drop from 70% to 60%, this is limited to £1,875 a month. Employers are obligated to pay a minimum of 20% of the employee’s wages, therefore, one would earn at least 80% of their salary. However, some employers may not be able to afford this scheme due to the current situation which would lead to more redundancies and potential collapse of SMEs.

The replacement job support scheme carries a bigger financial burden on the employers rather than the taxpayer. However, the goal would be to fund staff to work at reduced hours so employers resist mass redundancies which is costly. Nevertheless, critics state that it will be more expensive for employers to bring back furloughed workers in the long run.

Presently, due to the second national lockdown from 5th November, the current furlough scheme will be extended until the end of March 2021. Payments will remain at 80% or the employee’s wages throughout this period. We are yet to find out whether the Job Support Scheme replaces the furlough scheme, this was designed to help those who couldn’t do their jobs during lockdown and to prevent mass redundancies (BBC, 23rd October). The second national lockdown which commenced on 5th November grows new concerns for businesses, especially for SMEs who were already suffering from the first lockdown in Spring of this year. This could potentially affect the terms and conditions of the new Job Retention Scheme following the furlough scheme, however, there are hopes that we will be starting the exit phase when the second lockdown is reviewed on 2nd December.

Emma, Office and Social Media Administrator

Furlough – how far will it go?
Scroll to top