Rishi Sunak will ask all businesses to contribute to the JRS from 1 August by covering NI and pension contributions, rising to 10% of wages in September and 20% of wages in October. The JRS will then be closed down at the end of October.
He also announced some flexibility to the scheme so employees could start to return part-time from July.
He made no specific provision for the hospitality industry, which largely remains closed before it is allowed to reopen on 4 July. He also played down any chance of reactivating the JRS should there be a second spike in infections which may lead to lockdown measures being reintroduced.
“As we reopen the economy, there is broad consensus across the political and economic spectrum that the furlough scheme cannot continue indefinitely,” he said.
“I believe it is right in the final phase of this eight month scheme, to ask employers to contribute, alongside the taxpayer, towards the wages of their staff.
“But I understand, too, that businesses and employers have been through an incredibly difficult time. So I have decided to ask employers to pay only a modest contribution, introduced slowly over the coming months.
“In June and July the scheme will continue as before, with no employer contribution at all.
“In August, a taxpayer contribution to people’s wages will stay at 80%. Employers will only be asked to pay National Insurance and employer pension contributions, which for the average claim, account for just 5% of total employment costs.
“By September, employers will have had the opportunity to make any necessary changes to their workplaces and business practices. Only then, in the final two months of this eight month scheme, where we ask employers to start paying towards people’s wages.
“In September, taxpayers will pay 70% of the furlough grant with employers contributing 10%.
“In October, taxpayers will pay 60%, and employers will contribute 20%.
“Then, after eight months of this extraordinary intervention of the government stepping in to help pay people’s wages, the scheme will close.
“The biggest request I’ve heard from businesses large and small is to have the flexibility to decide what is right for them. So, to protect jobs, and help businesses decide how quickly to bring their workforce back, we are introducing a new, more flexible furlough.
“This is a critical part of our plan to kickstart the economy. The financial security of the furlough scheme has been a relief for many, but at the same time, people want to work.
“No one wants to be at home on furlough. No one wants to feel unable to come to work. So HMRC and the Treasury have worked hard to put the flexible furlough in place from 1 July. From 1 July employers will have the maximum possible flexibility to decide on the right arrangements for them.
“For instance, if are on furlough your employer could bring you back two days a week, they would pay you for those two days as normal, while the furlough scheme would continue to cover you for the other three working days.
“To allow us to introduce this new flexible furlough from 1 July, we will need to close the old scheme to new entrants on 30 June. Employers wanting to place new employees on the scheme will need to do this by 10 June to allow them time to complete the minimum furlough period before then.”
Last week, MCA Insight/HIM’s Hospitality Leaders Poll revealed 41% of hospitality operators won’t be able to contribute a penny to the JRS unless they are operating at full capacity by then.
“Our ability to top up Furlough is based on our income,” said one multi-site operator. “We won’t be able to start paying 20% of the salaries of people furloughed unless there’s enough income to pay the bills. In this scenario, we will look at the redundancy routes for excess numbers, and recruit as we ramp up when we do need the numbers.”
Reacting to the news, UK Hospitality CEO Kate Nicholls said the announcement was a “positive and pragmatic step towards reopening the economy while recognising that this recovery will take time, particularly in hospitality. Giving businesses increased flexibility from the start of July is extremely welcome as hospitality looks to reopen its doors to the public.
“The move will allow more people back to work on a part-time basis and help venues ensure safety for customers and staff. Flexibility is going to be crucial if businesses are to open and be economically viable with social distancing measures in place.
“The introduction of employer contributions to the scheme from August will put some businesses under particular strain, but the way it is tapered allows for a gradual adjustment. Further support for the self-employed is also helpful for many in our sector.
“The government still needs to recognise that these costs will be difficult for hospitality businesses to bear, and consider other measures to support the sector. This must include brokering a solution on rents, with Treasury contributions if necessary, and considering further grants to support businesses to reopen.
“If we can find a solution on rents and get an extension of the grant scheme, this will mitigate much of the impact of the reduced furlough. If we do not, a very difficult Spring would become a disastrous Summer for hospitality.
“We hope the government bears in mind that many high street businesses will be reopening in the next couple of weeks, whereas hospitality will be forced to survive for an additional month, at the very least, on this reduced form of furlough.”
Emma McClarkin, CEO of the British Beer & Pub Association, said: “Whilst we welcome the tapered furlough support and increased flexibility announced today, all pubs have to be open and operating viably by July for this scheme to work. Pubs have been closed since March with no income coming in. Expecting them to contribute to furlough costs if they are closed or operationally unviable is simply not feasible.
“We continue to work closely with government to ensure all UK pubs can open as soon as possible. Preventing pubs from re-opening as the furlough support reduces means that those pubs will have no income to cover the additional staff costs - risking job losses and pubs staying closed for good.
“Under the current two metre social distancing rules, two-thirds of our pubs will remain closed. To open pubs up safely as soon as possible, it is imperative the government explores the WHO’s suggested one metre rule for social distancing and allows pubs to re-open under those safe conditions in July. This will allow three quarters of our pubs to re-open and more staff to return to work – ensuring the tapered furlough scheme protects pub jobs as they re-open.
“We also call on the government to recognise that up to a quarter of our pubs may not be able to open even with a one metre rule in place, in which case they will need the furlough scheme to continue at the current 80% until they can reopen.”
Rishi Sunak: Employers will contribute 10% to the JRS from September and 20% in October
Rishi Sunak will ask all businesses to contribute to the JRS from 1 August by covering NI and pension contributions, rising to 10% of wages in September and 20% of wages in October. The JRS will then be closed down at the end of October. He also announced some flexibility to the scheme so employees could start to return part-time from July. He made no specific provision for the hospitality industry, which largely remains closed before it is allowed to reopen on 4 July.