There are warnings that the added pressure on firms from August 1 could result in another wave of redundancies and cuts where they cannot afford the extra payments
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One in five firms plan on letting staff go in response to Sunday’s furlough policy change, which saw the Treasury’s contributions fall to 60%, a report has found.
The British Chamber of Commerce said thousands of redundancies are likely ahead of the scheme’s closure next month.
On Sunday, government contributions fell to 60%, with employers paying 20%.
But are warnings that the added pressure on firms may result in job cuts, in fields such as aviation, where ongoing restrictions mean they are not able to meet the extra costs.
The British Chamber of Commerce surveyed 250 businesses, with 18% telling the chamber they were likely to make staff redundant in response to the change to furlough.
A quarter said they would aim to reduce hours or move staff to part-time working patterns.
Jane Gratton, head of people policy at the chamber, said the change “will likely result in many thousands of people being released back into the labour market, as employers who are still struggling to recover from the recession are forced to make redundancies and cuts to working hours”.
She said it was “crucial” that employers and the government give returning furloughed workers the support and training they need “to be re-engaged and productive”.
The government said the approach was “right” and meant “we can focus support elsewhere” as the economy recovers.
It said the new Plan for Jobs scheme has been introduced to help retrain staff who have been pushed out of industries since the start of the pandemic, writing off any hopes for a further extension.
According to the most recent figures up to 30 June, about 1.9m workers were on furlough, down from a peak of 5.1m in January and 9million last May.
The scheme is due to close at the end of September.
“We’ve always been clear that it’s not possible to save every job, but our Plan for Jobs is helping people of all ages find the skills they need to get back into work,” a Treasury spokesman said.
What changed on August 1?
At the start of the year, anyone on furlough would have 80% of their wages up to a maximum of £2,500 per month covered by the government.
On July 1 the rules changed and the government reduced how much it covered to 70% of wages up to a maximum of £2,187.50.
Employers then had to make up the difference – 10% – so everyone on furlough still got 80% pay, up to £2,500.
On August 1, the government contributions fell again – this time to 60% up to £1,875.
The firm must then pay the remaining 20%, taking it up to 80%, or £2,500.
That’s in addition to National Insurance and pension contributions.
Furlough pay in itself remains at 80% – meaning that workers will not see any changes to their earnings, other than a possible change in who pays 20% and who pays 60% on their payslip.
The 20% rate for employers will continue throughout August and September.
Can I be made redundant if I’m on furlough?
Despite being in place to protect jobs, the scheme is not a safety net against redundancy.
However, anyone made redundant while on furlough must get a full and fair redundancy package from their employer – not one that is subsidised by furlough pay or compressed due to Covid.
That means you will be entitled to a consultancy period (mandatory if more than 20 employees are at risk) and, at the very least, statutory redundancy pay, as long as you’ve been working at that employer for at least two years. If you’ve been on payroll for less than 24 months, you don’t qualify for redundancy pay in the eyes of the law.
Pay starts at half a week’s pay for every full year under the age of 22, one week’s pay for each full year you were 22 or older, but one and half week’s pay for each full year you were 41 or older.
If you’re made redundant after your company has gone into administration you can claim redundancy pay via Gov.uk.
Should furlough be extended again? Let us know in the comments secion below
Will furlough be extended?
Chancellor Rishi Sunak extended furlough last December by a month to the end of April 2021.
It was extended again due to rising cases, with a final end date of September 31, 2021.
How do I claim furlough pay?
Your employer needs to claim your furlough pay through HMRC.
They will provide details of your salary and working hours so that the taxman can calculate what the business is owed.
Your pay should come through in your wage packet as normal, and you shouldn’t have to do anything.
It’s worth double checking to make sure your pay is correct, particularly if you are on flexible furlough and working part time.
Who can be furloughed?
Your employer can furlough you if you were on their payroll before March 2, 2021.
This includes full time and flexible (or part time) furlough.