Companies could soon be banned from putting any more employees on furlough, with Rishi Sunak expected to make an announcement later this week.
At present, the Coronavirus Job Retention Scheme has granted 8,000,000 people absence from work, with the government paying 80% of their wages, up to £2,500 a month. However, the programme is expected to change in the coming months, with companies contributing a percentage of staff pay.
This could mean employers begin paying workers 20% of their salary, with government contributions falling to 60%. The Chancellor will lay out plans for the scheme this week.
He is also reported to be planning a cut-off date for when employees can be put on the programme, in a bid to prevent companies from furloughing current full-time workers and then bringing them back part-time in August.
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There are also growing concerns about the cost of the government scheme, which the Office for Budget Responsibility currently estimates to be around £84.000,000,000.
Sunak has spoken with business owners who have used the furlough scheme this week, writing on social media that ‘phase two’ will be launched imminently. He said the next stage would involve ‘flexible furloughing which I hope will help get us back up and running’.
Craig Beaumont of the Federation of Small Businesses warned that companies will a heads up in advance of any changes put in place by the government.
He told the Financial Times: ‘The vast majority of employers registering for the scheme are small and medium-sized Enterprises (SMEs). These struggle with changes, so any ending should be announced in advance so they have time to plan, including those who are entering the scheme now as their business enters difficulty.
‘The chancellor shouldn’t announce and pull up the rope ladder at the same time; announcing now for August 1 would be best.’
Tej Parikh, chief economist at the Institute of Directors, also said there may be companies who have been trying to ‘hold off’ using the scheme that ‘now need to’ just as the government brings applications to a close.
He said: ‘[For them], this will be a bitter pill to swallow. As the scheme winds down, other measures to cushion costs will be necessary to support businesses as they try to return to work.’
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