RHA "baffled" as government tells employers to help with costs of extended furlough scheme

The government’s coronavirus job retention scheme has been extended until October on current pay rates but employers will be expected to contribute towards the scheme’s costs after July, Chancellor Rishi Sunak announced today (12 May).

The RHA welcomed the extension but said it was "baffled" by the move, claiming its request last month for the scheme to have more flexibility had been rejected as too complicated.

It warned that any move to make employers pay towards the scheme when they are not operating at full capacity could cause businesses to collapse.

Announcing the plans in the House of Commons, Sunak said the scheme will continue to run in its current form until the end of July, but from August to October there will be “greater flexibility”, including allowing part-time workers on the scheme and making employers contribute toward some of the cost.

The original scheme, launched last month, saw the government paying 80% of wages, up to £2,500 a month, to furloughed employees.

The new measures come as concerns mount at the cost of the scheme which sees the government paying 80% of wages, up to £2,500 a month, to furloughed employees.

So far the scheme has paid out around £10bn to support around 7.5 million jobs from more than a million businesses.

Details on these new measures will be released later this month. However it is expected that the government will still pay at least 50% of wages through the scheme after July with all businesses asked to pay some of the furlough scheme from July, even if they are still closed. Employers will also be able to bring furloughed employees back part time.

Sunak said: “We will ask employers to share the costs of paying people’s salaries - workers will, through the combined efforts of government and employers, continue to receive the same level of overall support as they do now at 80% of their current salary up to £2,500 a month.”

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Responding to the scheme’s extension, RHA MD of policy Rod McKenzie raised concerns about plans to make employers contribute towards the scheme.

He said: “If employers are operating on full capacity then they will certainly have the cash flow to pay staff costs but if cash flow is significantly reduced by the impact of the pandemic then it is an extra cost they simply cannot afford and a risk to the continuity of their businesses.”

McKenzie said the additional flexibility in the scheme, which will allow employers to furlough staff part time does not go far enough.

“We have always wanted more flexibility in the scheme but we want weekly flexibility so operators can turn on and off the supply of workers to suit demand.

“The government rejected this as too complicated to administer so I am a bit baffled by the introduction of a similar system of part-time furloughing that has been introduced.”

FTA chief executive David Wells said he was keen to see more flexibility introduced to the scheme: “It will be welcomed by logistics businesses that have been directly impacted by the shutdown of the economy, providing a longer term stability to protect their staff from redundancy," he said. "However, it is vital that the option of part-time furloughing is made available to our sector now, to accommodate the gradual return of trade in all sectors.

"Demand will return to different sectors at different rates and it is unlikely to accommodate full-time working right across industry – therefore it is imperative that logistics businesses be given the flexibility to scale up their workforce in increments, to manage the financial risk of bringing staff back gradually.

"Without this option, the impact on our sector is likely to be significant and that could have a considerable effect on productivity across the entire economy.”

Added BVRLA chief executive Gerry Keaney: “Extending the Job Retention Scheme to the end of October provides a much-needed financial lifeline to millions of employers who are having to make tough decisions to keep their businesses viable and people safe.

“We are delighted to see the chancellor take heed of our recommendation to introduce flexibility to the furlough scheme. By enabling businesses to bring back furloughed staff on a part-time basis, employers will have the option to implement a phased return to work as companies look to kickstart their operations in a post-pandemic environment. Today’s announcement will undoubtedly prevent millions of job losses and we are grateful to the chancellor for his continued support of UK businesses.”