The government’s post-furlough plans could still leave a million people long-term unemployedby Tony Wilson / September 25, 2020 / Leave a comment
The chancellor had a difficult balance to strike yesterday. If the intention of the Job Retention Scheme in March was to protect workers, and July’s “Plan for Jobs” was designed to secure the recovery, yesterday Rishi Sunak needed to do a bit of both: to give real help to those firms at breaking point after the tightening of restrictions, while giving confidence to others to keep hiring and creating new jobs in the future. In the end though, the intervention was inadequate on both counts.
There were positives in the “Winter Economy Plan”: the further forbearance on VAT payments and business loans will give struggling firms some much-needed breathing space, while the continued cut to VAT in hospitality and tourism will offer some relief over winter. However the centrepiece announcement yesterday, of a new “Job Support Scheme,” appears likely to fall short of providing the help that many struggling firms, and their furloughed workers, are likely to need.
Unlike “short-time working” schemes in other countries, where the employer pays for the reduced hours that their staff work and the state tops this up, under the new Job Support Scheme the employer will pay both for the hours that people work and some of those that they don’t. So if an employee works one third of their normal hours the employer will pay 55 per cent of their wage, and if they work half the employer pays them for two thirds. Far from giving firms relief, in many cases it will cost them money.
Undoubtedly some companies, particularly larger ones, will want to sign up. If you have a long-serving workforce on permanent contracts with fixed hours, then the cost of putting lots of your staff on the support scheme may well be lower than the cost of making some of them redundant. But if you have a shorter-serving workforce, can vary or negotiate lower hours without this scheme, and are struggling to make it to Christmas, then why would you do it? Why put two staff on half their hours and pay them two thirds of their salary each, if it would cost you less just to keep one on? Inevitably, those firms that will most need relief will be the ones least able to afford to take it up. For them, yesterday’s announcement…