Next steps must carefully balance the need to support people back to work safely, and maintain an anchor that protects those who can't from being swept into poverty, says Mike Hawking.
The Coronavirus Job Retention Scheme has provided a vital lifeline to businesses and workers to stay afloat through the COVID-19 storm. The Chancellor’s announcement to extend the scheme earlier this week means this crucial support will continue through the uncertain times ahead. Government must ensure that the changes they intend to make to the scheme carefully balance the need to support people back to work safely, and maintain an anchor that protects those who can't from being swept into poverty.
Almost a million businesses and 7.5 million jobs have benefited from the Coronavirus Job Retention Scheme (CJRS), which covers 80% of employees' wages up to £2,500 per month. That is around a quarter of the UK’s entire workforce. Given the numbers of jobs involved, the decision to extend the current scheme until the end of July is sensible, providing certainty for employers and not risking a surge in redundancies.
In our briefing ahead of the Chancellor’s announcement, we suggested the next phase of CJRS should aim to support as many workers as possible to return to work safely and provide protection for those who can't. In addition to calling for the extension of the scheme, we also supported many organisations recommending the introduction of a part-time furlough scheme, and for furloughed workers to have access to training whilst they are not in work. The Government’s commitment to both these things is very welcome.
But as we await further details of how the Government intends to amend the scheme from August, there are still several issues we raised that need to be resolved. We also think the Government should start to consider how it can support new jobs to be created, as well as protecting those that already exist. The Government plans to publish further information by the end of the month. Here’s what we think it needs to cover:
1. The Government has rightly promised that furloughed workers will continue to receive 80% of their earnings until the end of the scheme. From August, employers will be asked to make a contribution to cover the costs. This will discourage firms from furloughing workers until October, only to make large scale redundancies when the scheme ends. That would be bad both for individual workers and the wider economy.
But getting the level of contributions right will be vital. The Government should seek to avoid forcing viable firms to make decisions about redundancies sooner than is necessary by asking for contributions before they are able to generate income. This will be particularly important for sectors, such as retail and hospitality, that will be more affected by social distancing guidelines. The Government has said it will listen to business on this issue, but it should consider whether the level of contributions need to be varied by sector.
2. The introduction of a part-time furlough highlights unequal treatment of workers on flexible and zero-hour contracts in the labour market. Workers on such contracts could be furloughed through the CJRS, but it’s been widely reported that this hasn’t happened consistently. As businesses begin to bring these workers back, their flexible contracts mean employers can offer fewer hours than they may normally work without using the part-time furlough arrangements. Although their income can be topped up by Universal Credit, it is significantly less generous than the support offered by the CJRS.
As an example, the table below compares how two people both working 30 hours a week at the National Living Wage prior to lockdown could be treated differently depending on what contract they have*.
|Type of contract||Outcome||Earned income (weekly)|| |
Benefit income (weekly)
|Total weekly income|
|Worker on a 30 hour a week contract||Worker is brought back on part-time (15 hours) furlough and employer topping wages up to 100%||£261.60||£64.81||£326.41|
|Worker brought back on part-time (15 hours) furlough, but employer not topping up wages||£209.28||£94.24||£303.52|
|Worker on a flexible contract working on average 30 hours a week pre-COVID-19|| |
Worker is brought back to work for 15 hours, but not furloughed
This could further entrench labour market inequalities. Government should monitor how many workers are affected by this and look for ways to address it in the future. It should also further bolster the support offered in Universal Credit and Tax Credits so that the social security system continues to provide an anchor for families through the COVID-19 storm.
3. The CJRS allowed people who were unable to work because they were shielded to be furloughed by their employers. It is important that the next phase of the CJRS remains open to those who are clinically extremely vulnerable for as long as public health guidance is to shield. The Government shouldn’t require employers to contribute to the costs of the scheme for these individuals. Some workers who are shielding may wish to look for alternative work they could do from home. The Government should explore ways it can support this.
4. Workers with caring responsibilities, such as looking after children not in school or nursery, could also be furloughed through the CJRS. Although the Government intends for some children to return to school in June if it is safe to do so, this won’t apply to all. And as we enter the summer holidays – early July in Scotland and Northern Ireland, but late July in England and Wales – families may struggle to access childcare because of social distancing requirements. This is especially a problem for single-parent households, who were more likely to be in poverty before the pandemic than any other family type. The next phase of CJRS should remain open to people who can’t work for caring reasons until schools and nurseries fully re-open.
5. Despite the Government’s interventions, the UK’s unemployment rate is set to significantly increase. The next phase of the Government labour market policy needs to go beyond protecting existing jobs, and into how it can support new jobs and help people back to work. Alongside a revised CJRS, the Government should consider how:
- Job guarantee schemes could be introduced to support young job seekers or other unemployed groups find work with accredited training. The Future Jobs Fund proved a successful model that could be used as a basis for a new scheme.
- It can invest quickly in employment support services to boost access to advice, guidance, and training for unemployed people across the country.
- Furloughed workers can be supported into roles in other businesses. One option for this would be to transfer their wage subsidy to a new employer.
The CJRS has helped keep workers and businesses afloat during the first phase of the pandemic. As we move into the next phase, the Government focus needs to move beyond the protection of existing jobs, and on to what further support will be needed to help with recovery. Interventions to boost the creation of new jobs and the support needed for people to get into them will be just as necessary as a revised CJRS.
*Benefit entitlements calculated for a single person aged over 25, with no children, earning the National Living Wage, paying lower quartile rent for a property in York, in Council Tax band D, using: https://www.entitledto.co.uk/benefits-calculator. Lower quartile rent data taken from: https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/privaterentalmarketsummarystatisticsinengland