Furlough Scheme Starts to Wind Down

Furlough Scheme Starts to Wind Down.
Employers will have to shoulder more of the costs of furlough from Thursday as the government starts to wind down its flagship job support scheme. With about 1.5 million workers still on furlough, the change will affect thousands of firms across the country.

Staff will continue to receive 80% of their wages, but employers will pay part of that for the first time. That could prompt layoffs, with older workers at greater risk of redundancy, according to one think tank.

The Institute for Fiscal Studies said the bill for employers keeping a member of staff on the scheme would rise from £155 per month currently, which covers costs such as National Insurance, to £322 in July and £489 in August and September.

As a result, firms might reconsider whether they will retain staff, the IFS said. “The furlough scheme does need to be wound down as the economy recovers, rather than attempting to keep every job on life support. But this does mean that some will end up unemployed,” said Tom Waters, a senior research economist at the IFS.

The Treasury says its furlough funding is still “substantial”.

“We deliberately went long with our support to provide certainty to people and businesses over the summer. The furlough scheme is in place until September and is amongst the most generous schemes in the world,” it added.

From 1 July, employers must pay 10% of their furloughed workers’ usual wage, while the government will continue to pay the other 70%.

From 1 August, the employers’ contribution rises to 20%, with the government’s contribution reducing further.

The furlough scheme has been praised for providing workers with some security. Unemployment has remained below 5%, despite early fears it would rise much higher as the pandemic pulled the rug from under the economy.

Employers welcomed the scheme as a way to retain staff that were trained and qualified, who they wanted to keep in place for when they were able to reopen.

“We’ve tried to retain as many people as possible,” said Mark Vincent, chief financial officer at travel company, Newmarket Holidays. “The furlough scheme has been critical. It’s part of the difference between survival and not.”

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