UK helps employers with slow phase-in of job shield costs

LONDON (Reuters) – British finance minister Rishi Sunak offered fresh help to employers hit by the coronavirus shutdown on Friday, announcing that future contributions they must make to the government’s costly wage subsidy scheme will be phased in slowly.

FILE PHOTO: Britain’s Chancellor of the Exchequer Rishi Sunak attends a news conference on the ongoing situation with the coronavirus disease (COVID-19) in London, Britain, March 17, 2020. Matt Dunham/Pool via REUTERS/File Photo

In August, companies will only have to make pension and social security payments for the workers they have temporarily laid off while the government will continue to pay 80% of their wages.

Employers would then be asked to pay 10% of the wage costs in September and 20% in October, reducing some of the huge burden on the public finances but a lighter requirement than reported by media before the announcement.

Sunak also brought forward to July 1 the introduction of part-time work under the programme – a demand of businesses seeking to build up their operations gradually after the lockdown – and he extended another multi-billion-pound income support scheme for self-employed workers.

“Our top priority has always been to support people, protect jobs and businesses through this crisis,” he said.

“Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.”

Unions and employers are united in support for the programme which, while common in other European countries, represented a major shift for the ruling Conservative Party and its traditional free-market instincts when it was launched in March as the coronavirus crisis engulfed the world economy.

“The changes announced will help ensure the schemes stay effective as we begin a cautious recovery,” Carolyn Fairbairn, head of the Confederation of British Industry, said.

Len McCluskey, leader of Unite, one of Britain’s biggest trade unions, welcomed the changes too but said the government now had to provide more support for sectors hit hardest by the crisis such as aviation and hospitality.

“Without such assistance, and soon, many businesses will simply shut up shop resulting in the mass unemployment the chancellor has sought to avoid these past two months,” he said.


Around 8.4 million temporarily laid off workers, or about one in three private sector employees, are covered by the Coronavirus Job Retention Scheme, which has already cost the state about 15 billion pounds ($18 billion).

It is due to expire at the end of October and Sunak said on Friday that it will close for new claims on June 30.

The Bank of England says the scheme could limit a rise in the unemployment rate to about 9%, double its most recent reading but way below an estimated 20% in the United States.

Under the plan, workers are receiving 80% of their wages up to 2,500 pounds a month.

Some employers had warned that they would not be able to pay 20% of the wage costs of their furloughed staff as soon as August – as reported by media before Friday’s announcement – raising the risk of a fresh surge in job losses.

However, Sunak says the scheme is too expensive to continue indefinitely.

FILE PHOTO: Chancellor of the Exchequer Rishi Sunak leaves Downing Street, following the outbreak of the coronavirus disease (COVID-19), London, Britain, May 4, 2020. REUTERS/John Sibley

Britain’s borrowing in April alone of over 60 billion pounds was equivalent to almost all of the previous financial year and looks set to hit 300 billion pounds this year, a towering 15% of gross domestic product.

About 2.3 million claims totalling 6.8 billion pounds have been made under the income support scheme for self-employed people.

That had been due to close on Sunday but Sunak said it would be extended and a second, slightly smaller final grant would be available from August.

Additional reporting by Andy Bruce, William James and Kate Holton; Writing by William Schomberg; Editing by Hugh Lawson and Frances Kerry

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