Covid: UK's furlough scheme starts to wind down

Employers will have to shoulder more of the costs of furlough from Thursday as the government starts to wind down its flagship job support scheme.

With about 1.5 million workers still on furlough, the change will affect thousands of firms across the country.

Staff will continue to receive 80% of their wages, but employers will pay part of that for the first time.

That could prompt layoffs, with older workers at greater risk of redundancy, according to one think tank.

The Institute for Fiscal Studies said the bill for employers keeping a member of staff on the scheme would rise from £155 per month currently, which covers costs such as National Insurance, to £322 in July and £489 in August and September.

As a result, firms might reconsider whether they will retain staff, the IFS said.

"The furlough scheme does need to be wound down as the economy recovers, rather than attempting to keep every job on life support. But this does mean that some will end up unemployed," said Tom Waters, a senior research economist at the IFS.

The Treasury says its furlough funding is still "substantial".

"We deliberately went long with our support to provide certainty to people and businesses over the summer.

"The furlough scheme is in place until September and is amongst the most generous schemes in the world," it added.

What is changing?

From 1 July, employers must pay 10% of their furloughed workers' usual wage, while the government will continue to pay the other 70%.

From 1 August, the employers' contribution rises to 20%, with the government's contribution reducing further.

The government has spent £66bn on the Coronavirus Job Retention Scheme, as furlough is officially known, and it has supported 11.2 million jobs since March 2020.

At the end of March this year, more than a third of employers still had staff on furlough. But since then, the gradual opening up of non-essential retail and large parts of the hospitality sector has allowed many of those workers to return.

Now only about one in 20 workers who are employed by businesses are either fully or partially furloughed.

However, some workers in sectors that have been particularly hard hit by measures to curb the pandemic, such as night clubs and international travel, have been furloughed for many months.

Posted on Jul 01, 2021.

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