The chancellor has confirmed that furloughed staff are permitted to work part-time from July and that the scheme will be closed by the end of October.
Rishi Sunak also announced that the government’s contributions to the Coronavirus Job Retention Scheme will be gradually reduced in today’s daily coronavirus briefing.
The Treasury will continue to fund 80% of furloughed employees salaries up to the end of August, up to £2,500 a year. However, from August, employers will be asked to cover employees’ national insurance and pension costs, which Sunak said typically equates to 5% of overall costs.
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But from September the government’s contribution will be reduced to 70%, with employers covering the remaining 10% meaning furloughed employees receive the same amount as before.
For October, the government will contribute 60% and employers will be asked to cover 20% of furloughed employees’ wages.
Workers will be allowed to return from furlough on a part-time basis from July 1.
Sunak gave the example that a furloughed employee could work two days a week, at full pay covered by their employer, and be furloughed for three days, receiving 80% through the Coronavirus Job Retention Scheme.
“Employers will have the maximum possible flexibility to decide on the right arrangements for them and their furloughed staff,” Sunak said.
The furlough scheme will be closed on June 30, with employers asked to get final applications in by June 10.
Sunak also announced that the government’s Self-Employed Income Support Scheme, which was due to end this weekend and has had 2.3 million applicants, is to be extended.
Applications will be open in August for the “second and final grant” which will be paid in the same way as the first by way of a single installment based on average profits over three months.
But to bring it in line with the changes to the furlough scheme, the government will cover 70%, rather than 80%, up to a total of £6,570.
Sunak confirmed there would be “no further extensions to the schemes”.
He added: “Our economic response to coronavirus was designed to keep people in work, protect people’s incomes and to give us the best chance of recovering quickly.”
Chief executive of the Airport Operators Association, Karen Dee, welcomed the clarity, which she said allowed airports to plan future operations.
She said: “Airports have lost nearly all their revenue due to the lack of passenger flights, but they remain open for critical and lifeline services. The flexibility will be essential to keep airports open, protect their financial viability and assist them in protecting jobs for the time when air traffic returns to sustainable levels. It is needed more than ever, as passenger levels will remain near zero for some time as the result of the blanket quarantine that will come in on June 8.
But she called on the chancellor extend the furlough scheme beyond October for hard-hit industries, such as aviation, or offer other support measures such as extending business rates relief. “The UK’s airports face a long and challenging road to recovery,” she added. “Businesses in our sector have been some of the hardest hit by the crisis.”
Clive Wratten, chief executive of the Business Travel Association, reiterated the message that sectors such as travel require extra support, noting the changes to furlough come “hot on the heels of the 14-day quarantine announcement which dramatically setback any future travel bookings”.
He said: “A blanket change to the UK’s furlough scheme will not be felt equally across the economy. It’s well-known that the aviation, travel, hospitality and events sectors are on their knees. Even the scaled scheme announced will put several long-standing companies out of business – swiftly. Many, many jobs across our sector will be lost.”
Kuoni chief executive Derek Jones tweeted: “Rishi’s plan from August will help many buinesses as they gradually see their revenues return…but for the travel industry, with cancellation refunds ongoing and new booking levels unlikely to recover to previous levels for some time, it represents a significant challenge.”
Steve Witt, co-founder of homeworking company Not Just Travel, said: “The chancellor’s changes announced on Friday will give consumers more confidence in their future income which will, in turn, hopefully give confidence to millions of people to either proceed with their travel plans, or commit to bookings for later in 2020 or 2021.”
He added: “In addition, the extending of furlough measures means that the industry has the continued ability to retain good quality and experienced staff which they would have otherwise had to lose.
“The ability to bring team members back part-time means you can start to reintroduce people in line with the sales, making it much more manageable. If we had to just suddenly bring everyone back full-time in one go it would not be manageable or sustainable, so this is a very welcome relief.”