The coronavirus retention program will be extended for an additional four months – ensuring that workers on leave get 80% of their regular wages up to £ 2,500 a month, even though they are not at work.
But in a major change, government support for the program will be cut from August 1 – companies are asked to make up the difference themselves.
Chancellor Rishi Sunak insisted that no worker would be in a worse situation – because the companies and the state will pay 80% of the wages between them.
Workers on leave will also be able to return part-time as little as one day a week starting in August.
But the reduction in the state’s treasury is likely to cause major unrest for millions of workers who now have to rely on cash-strapped bosses to pay.
Deputy Labor Leader Angela Rayner tweeted, “The program should continue at the same level.
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“We cannot afford not to do it right. I think it is really important that the Chancellor continues with good practice to make sure that the leave scheme is in place and not trying to cut it too early. “
Up to 7.5 million people have had up to 80% of their wages paid by the taxpayer under the leave system, at a cost of £ 10 billion so far.
Sunak previously said he was preparing to “wean” workers and businesses from the program – which runs until the end of June.
But today, he has revealed his intention to continue the program until the end of October.
He told MEPs that the scheme would remain in its current form until the end of July – the government covering 80% of the wages of people on leave.
From that point on, the government said it would ask businesses to share the cost of the program.
This means that pub giants and restaurant chains have to pay their employees for the first time under the scheme – even if they remain closed.
The government has said restaurants and cafes could reopen from July 4. But according to some sources, some places, such as pubs, gymnasiums and nightclubs, could take much longer to reopen.
Sunak promised that employees would continue to receive at least 80% of their salary – up to £ 2,500 per month.
This means that workers should not see any change to their wages, but their employers will have to put in more money.
Officials insisted that the “largest” amount would still be funded by the government.
But the exact amount paid by the state will not be confirmed until late May.
And there is concern that it will trigger a wave of layoffs – if companies decide they can’t afford to make up the difference.
Ghost Chancellor Anneliese Dodds called on the government to let businesses know how much they will need to contribute as quickly as possible.
She said, “The government needs to clarify today when employers will start paying premiums and how much they will be asked to pay.
“If every company suddenly has to make a substantial contribution from August 1, there is a very real risk of massive layoffs. “
One proposal under consideration was to cut government support to 60% – but former Governor of the Bank of England Mervyn King said such a cut would be a mistake.
“Keep it at 80%. I don’t think it makes sense to view this as the major economic cost of the COVID-19 crisis, “he told the BBC.
Employers do not have to make up the difference, and there is no guarantee that a reduction would make them more likely to bring in full-time workers if economic demand remains weak.
TUC Secretary General Frances O’Grady welcomed the announcement.
She said, “We are delighted that the ministers listened to the unions and extended the retention program to the fall. It will be a great relief for millions of people.
“Changing the rules to allow part-time work is essential to allow a gradual and safe return to work. And keeping the rate at 80% is a victory for the wages of working families. “
“As the economic consequences of Covid-19 become clear, unions will continue to press for a job guarantee system to ensure that everyone has decent work.”
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The government has been criticized after insiders said they feared workers would become “dependent” on the plan.
Ghost Chancellor Anneliese Dodds said people did not want to be on leave, adding to the Commons: “It is extremely important that they are not penalized for this choice. We welcome the flexibility mentioned, we have asked for it several times. “
But today the Chancellor has moved away from these words.
He ranted, “The use of the word addiction is not the one I have ever used, nor the one with which I agree. People believe in the dignity of their work. “
Dame Carolyn Fairbairn, Managing Director of CBI, said the companies would like more details and asked the ministers to be prepared to be flexible in the event of a second peak.
She added: “Extending the leave to avoid a cliff in June continues the significant efforts already made and will protect millions of jobs.
“The introduction of much-needed flexibility is extremely welcome. It will set the stage for businesses that are waking up, while helping those that remain in hibernation. This is essential because the British economy is gradually recovering, while supporting livelihoods. “
The Resolution Foundation think tank said the job support program should continue until the end of the year for retail and hospitality workers hardest hit by coronavirus .
He said the program should remain open to workers in all sectors until early August – more than a month longer than expected – and that companies should be able to bring back part-time workers from June .
CEO Torsten Bell hailed today’s announcement describing the retention program as an “essential lifeline.”
He said: “The Chancellor is right to reject calls to end it quickly and instead to opt for a package of measures to extend and reform it. Acting too quickly could trigger a huge second wave of job losses at a time when unemployment already appears to be at its highest level in a quarter of a century.
“Adding flexibility so that employees can be put on partial leave will help support a return to economic activity, while asking employers to contribute to the cost of their employees on leave and to keep payments to workers at 80% previous wages is the right approach.
“Of the two, the devil will be in the details, with HMRC facing another big delivery challenge. The amount requested from companies must be carefully calibrated to avoid triggering unnecessary redundancies.
“The government’s plans for the job retention program should remain dependent on the success of safely removing the elements of the lockout. A further extension for the most affected areas, such as pubs and bars, may well be needed beyond October. “
The BoE said last week that the economy could contract by more than a quarter in the three months ending in June, and that unemployment would approach 10% of the working population.
Carl Emmerson, Deputy Director of IFS, said: “Extending the coronavirus job retention program for a fifth month, in its current form, will increase costs by around £ 10 billion. This brings the total support provided by this program to around £ 60 billion. “