Chancellor Rishi Sunak told the Houses of Commons he is extending the job retention scheme supporting furloughed employees until the end of October at 80% rate. The new guidance also includes greater flexibility of part-time work.

Despite reports that the Chancellor was set to lower the furlough salary payment level to 60%, Sunak decided against cutting back on the current 80% rate on salaries up to £2,500.

However, much to the chagrin of the self-employed, the Chancellor did not mention an extension to the self-employed income support scheme, which is now open for claims.

‘Greater flexibilty’

The current terms of the furlough scheme will remain unchanged until the end of July, but from August onwards, Sunak said it will allow greater flexibility to phase furloughed employees back to work.

While the finer details have yet to emerge, the Chancellor said this “greater flexibility” would enable employers currently using the scheme to bring workers back part-time. Employers who choose to do this will be asked to pay a percentage towards the salaries of their furloughed staff, which will replace the government’s contribution.

The government will also ask employers to share the costs of paying people’s salaries and more details about the extension will follow by the end of May.

With the original end of June cut-off creeping closer, employers were looking to the Chancellor today for clarity on the furlough scheme before the 45-day redundancy consultancy period kicked in.

“Our Coronavirus Job Retention Scheme has protected millions of jobs and businesses across the UK during the outbreak – and I’ve been clear that I want to avoid a cliff edge and get people back to work in a measured way,” said Sunak.

The government is exploring ways to support furloughed workers to use the period to learn new skills or partake in additional training, he added.

Aligns with government’s ‘plan to rebuild’

The extension of the furlough scheme until October follows the Prime Minister’s preliminary sketch of a gradual roadmap to ease the lock down and restart businesses. The October date for the end of the furlough scheme aligns with step three in the government’s plans to open the remaining businesses and premises in the hospitality and leisure sectors that were shut during the lock down.

Since HMRC opened the job retention scheme portal on 20 April, 7.5m jobs have been furloughed and 935,000 employers have used the scheme. The total claimed so far stands at £10.1bn.

These statistics were accompanied by figures showing the take up of its other coronavirus schemes. These included 268,000 Bounce Back Loans worth £8.3bn, 35,919 loans through the CBIL scheme worth over £6.1bn, and 59 loans worth £359m through the Coronavirus Large Business Interruption Loan Scheme.

But as Heather Self noted, the Chancellor may need to contemplate revisit these schemes. Sectors such as hospitality and leisure are unlikely to fully reopen by the end of July and may need to contemplate redundancies.

“Additional support beyond the furlough scheme will be needed for a long time – whether loans such as the CBIL scheme, or grants, or incentives such as an increase in the Employment Allowance to encourage employers to maintain their staff levels, or even take on new employees,” she said.