Companies using the government’s coronavirus leave program must now contribute to workers’ wages.
Since March, the coronavirus job retention program has paid 80% of the wages of workers on leave, up to a maximum of £ 2,500 per month.
But now it’s down to 70%. 100, the employer paying 10%.
The program is scheduled to end at the end of October and Chancellor Rishi Sunak has repeatedly ruled out an extension of it.
Last month he said it was “wrong to keep people trapped” in a situation where there was no realistic prospect of them having a job to return to.
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From 1 September the government will pay 70% of wages up to a cap of £ 2,187.50 per month. Employers are already paying employee pension contributions and national insurance, but will now also have to pay 10% of wages.
In October, the government will pay 60% of wages up to a cap of £ 1,875. The employer’s share of the bill will then increase to 20% of wages.
BBC Business Correspondent Dharshini David
It has been hailed as revolutionary: the program that has provided a vital lifeline to businesses and more than 9.5 million workers.
But weaning UK companies from the retention program will be the biggest challenge for Rishi Sunak to date.
With far from usual business, one in 12 workers continues to have their wages paid by the state.
The Chancellor is adamant that it is time to end the program as businesses reopen. So far, the price has crossed £ 35bn, the kind of level that indicates a tax hike later.
Instead, it highlights other forms of support for maintaining and creating jobs that it has introduced, from a system of bonuses for employers who retain their staff to targeted VAT reductions for employment. hotel industry.
Still, the Chancellor’s independent forecaster believes unemployment could reach levels not seen since the 1980s.
Mr. Sunak admits he cannot save all jobs. The challenge is to avoid a crisis that could ultimately be much more costly for the economy.
Fears of unemployment
The rising cost of the scheme poses a problem for employers, who must make difficult decisions about whether to lay off staff.
Craig Beaumont of the Federation of Small Businesses told the BBC’s Today program that a million small employers across the country have used the leave program.
He said 23% of small employers plan to downsize in the next three months.
“It’s very, very serious. It’s a huge part of the economy, ”he said.
“Sixty percent of those who work in the private sector are doing it for a small business, so if it happens without any intervention, then it’s a huge increase in mass unemployment. “
Paul Dales, chief British economist at Capital Economics, told the program that other countries, such as France and Germany, have expanded comparable programs.
Last week, for example, Germany agreed to extend until the end of 2021 a program that supplements the wages of workers affected by the coronavirus pandemic.
“The UK agenda, in that sense, seems a bit short, especially when you take into account that the UK economy is made up of a higher share of sectors that are hampered by social distancing,” Mr. Dales.
However, he added that many jobs were currently “frozen” and would not return after the coronavirus crisis.
“You want to start the process of reallocating these people to jobs that will last for many years,” he said.
Some businesses that are still suffering from the pandemic, including concert halls that have yet to reopen, are feeling the effects of the shrinking holidays.
Tristan Moffat, operations manager for Piano Works bars in London’s Farringdon and West End, told BBC Radio 5 live that his company has 104 staff on leave.
Bars are still closed at this time, but the company hopes to reopen them in October with strict social distancing measures in place.
The idea is that before customers even enter the club, they will have their temperature taken and be sprayed with disinfectant in a special tunnel.
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But that depends on the lifting of the restrictions on audience singing and dancing, as each hall has a group of six musicians who play music continuously.
“If we are not able to reopen in the short term, we will have very difficult decisions to make,” he said.
‘Hide the damage’
The imminent end of the regime is already having an impact on the economy, analysts say.
Conciliation service Acas said calls to its redundancy advice line nearly tripled in June and July, as concerns mounted over the implications.
Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown, said: “The end of the leave program was followed by announcements of significant job losses in several industries, particularly travel and retail.
“Although growth picked up with the easing of lockdown restrictions, it has become increasingly clear that the government’s job retention program has masked the damage caused by the pandemic on jobs and the economy. economy in general.
“As the program shrinks further early next month and the government stops subsidizing wages by October 31, we expect the economic recovery to falter as companies in many sectors are forced to lay off more. of staff. “