The UK job retention scheme will be extended to the end of October and kept at 80 per cent of furloughed workers’ salaries.
But from August the government will ask employers to make a contribution, raising fears some companies will simply make staff redundant leading to mass unemployment.
Both Labour and the SNP warned that making employers stump up for the scheme could lead to mass redundancies.
Chancellor Rishi Sunak said there would be no changes in the system under which the government pays 80 percent of furloughed workers’ wages up to £2,500 per month, until the end of July.
From August, the scheme will continue for all sectors and regions of the UK the chancellor said but with greater flexibility for firms to bring staff back to work part-time. Under the current scheme furloughed employees cannot work.
The Tory chancellor glossed over the details of the changes to the £10 billion a month scheme when he announced the four month extension in the Commons.
But it is expected that businesses who voluntarily join the scheme will have to make a 20 per cent contribution to match 60 per cent support from the government from August onwards.
Details will not be available until the end of month with Treasury officials only stating that “the government will be bearing the most substantial part of the contribution”.
The official added: “How much is provided by the government and businesses will be changed but employees will still receive 80 percent of salaries up to £2500 a month.”
The scheme currently supports 7.5 million jobs and one million businesses have benefitted from keeping employees linked to their company as they await the end of lockdown.
The extension was widely welcomed by business and trade unions but but both Labour and the SNP raised concerns about the risk of changes making companies choose redundancies over retention of staff.
Anneliese Dodds MP, Labour’s Shadow Chancellor said the government must clarify when employers will be required to start making contributions, and how much they’ll be asked to pay.
She warned: “If every business is suddenly required to make a substantial contribution from the 1st August onwards, there is a very real risk that we will see mass redundancies.”.
Alison Thewliss MP, the SNP Treasury spokeswoman, immediately criticised the planned change to employer contributions which she warned could lead to mass redundancies as businesses struggle to make any matching wage support.
She said: "Businesses have been struggling since lockdown, and many are now on the tightest of margins and carrying significant costs and have deferred taxes, bills and debt stacking up.”
Asking them to pay 20 per cent of salaries from the start of August when many will have had no income risks pushing businesses and their employees over the edge. The Chancellor should reconsider and make sure businesses get the full 80 per cent of support to keep staff in jobs.”
