Investor Alert

May 29, 2020, 12:52 p.m. EDT

Businesses will need to contribute to wage bills as U.K government scales back financial support

Furloughed workers will continue to have the majority of their wages covered by the state, but bosses will have to start contributing from August

By Archie Mitchell

Getty Images
Sunak announced on Friday that the government would begin scaling back its support for furloughed workers and extend support for the self-employed (TOLGA AKMEN/AFP via Getty Images)

Bosses will have to start contributing to the wages of their employees as the U.K. government starts scaling back its employment support program, finance minister Rishi Sunak announced on Friday.

From August, employers will have to contribute to National Insurance, the U.K.’s social security network, and pension pots.

The government’s Coronavirus Job Retention Scheme (CJRS) had allowed employers to claim back 80% of workers’ pay from the state for keeping them on payroll while businesses are closed.

So far 8.4 million people in the U.K. have been furloughed on CJRS, with the government paying out £15 billion ($18.4 billion) to keep people employed through the crisis.

But in September the government will cut the amount employers can claim each month to 70% of salaries with a maximum of £2,190, a month later than had been expected. Employers will have to cover the remaining 10%.

A month later the cap will drop further with the government covering 60% of wages and a maximum of £1,875 each month. Then the scheme will end. Prior to that bosses will have the flexibility to bring back workers part time, and use the CJRS to pay workers for the days they are not working.

Read: A million Brits are set to have their wages paid by the state as firms rush to join new compensation scheme

“We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side,” Sunak said in an embargoed statement released ahead of the government’s daily coronavirus press briefing.

“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.”

Edwin Morgan, director of policy at the Institute of Directors (IoD), which represents company directors and business leaders said: “The furlough scheme has played an immense role protecting jobs, and business leaders understand it couldn’t be sustained at the same level forever. This is a much more gradual tapering than many were expecting. The greater flexibility will be warmly welcomed by business leaders.”

Dame Carolyn Fairbairn, director-general of the CBI lobby group, said: “The Government’s support throughout the lockdown so far has been a lifeline for businesses, employees and the self-employed. The changes announced will help ensure the schemes stay effective as we begin a cautious recovery.”

Read: U.K. government to keep paying wages of furloughed workers until end of October as jobs program extended

Over 100 members of parliament have written to Sunak urging him to extend a similar scheme supporting self employed workers.

Sunak announced Friday this scheme, through which self employed workers can claim a grant worth 80% of their average monthly profits for the three months to June, will indeed be extended. Self employed people will be able to claim 70% of their monthly profits for the three months to September capped at £6,570.

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