Quarter of UK firms will struggle under Covid wage scheme changes - IoD
A quarter of businesses using the UK government's coronavirus Job Retention Scheme said they would struggle to contribute to furloughed workers’ salaries from August, according to the Institute of Directors (IoD).
Around half of 700 company directors using the scheme surveyed by the business lobby group said they could provide 20% or more of staff wages to furloughed workers.
Finance Minister Rishi Sunak was expected to this week announce changes to the scheme that was introduced to prevent mass unemployment as businesses were forced to shut down as part of the government's lockdown measures.
The changes include a bar on new entrants and details of what employers will have to contribute when the scheme is extended from the start of August along with rules allowing furloughed employees to go back to work part-time.
The IOD survey found that more than a third of those using the JRS said they would bring the majority of their furloughed workers back part-time, if the scheme allowed it and fewer than one in 10 said they wouldn’t bring anyone back part-time.
To protect jobs, the IOD called for as much flexibility as possible in the system, with the majority of those polled who had staff on furlough saying they would make use of shorter minimum furlough periods if allowed.
Employees in the scheme are currently receiving 80% of their normal pay capped at £2,500 a month, with employers fully compensated for pay, employer national insurance contributions and pension contributions.
However, Sunak has said that after August employers would be expected to pay a contribution towards continued costs with a draft proposal for businesses to start paying 20%, reducing the government contribution to 60% per full and part-time worker.
The IoD called on Sunak to provide targeted financial assistance for small businesses who had to adapt their premises to meet social distancing rules.
IoD director general Jonathan Geldart warned of possible job losses, saying the “ugly truth is that if there’s no money coming in the door, many firms will be forced to make difficult decisions come August”.
“There is hope that as more areas of the economy return to work, more companies can keep people on board. However, despite best efforts, many firms simply won’t be able to work at full capacity for the foreseeable future, and there’s no magic wand to lift demand back up again.”