The government and firms will continue to top up wages of workers who have not been able to return to the workplace full time due to the coronavirus.
The Job Support Scheme, which will replace the furlough scheme, will see workers get three quarters of their normal salaries for six months.
It aims to stop mass job cuts after the government introduced new measures to tackle a rise in coronavirus cases.
Chancellor Rishi Sunak said it was part of a wider “winter economy plan”.
Nearly three million workers – or 12% of the UK’s workforce – are currently on partial or full furlough leave, according to official figures. The current furlough scheme ends on 31 October.
Mr Sunak said the new scheme would “support only viable jobs” as opposed to jobs that only exist because the government is continuing to subsidise the wages.
At a press conference, Mr Sunak declined to comment on what defines a job as “viable”.
“It is not for me to sit here and make pronouncements on every individual job,” he said. “What I want to be able to do is to provide as much support as possible given the constraints we operate in. We obviously can’t sustain the same level of things that we were doing at the beginning of this crisis.”
The government’s contribution to workers’ pay will fall sharply compared with the furlough scheme. Under furlough, it initially paid 80% of a monthly wage up to £2,500 – under the new scheme this will drop to 22%.
“The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve,” Mr Sunak said.
“I cannot save every business, I cannot save every job.”
The new scheme begins on 1 November and will cost the government an estimated £300m a month. Companies who use it can also still claim the Job Retention Bonus, where the government pays £1,000 for every furloughed employee who comes back to work until at least the end of January.
Mr Sunak said a similar scheme for the self-employed would be available.
How will the Job Support Scheme work?
- Under the scheme, the government will subsidise the pay of employees who are working fewer than normal hours due to lower demand
- It will apply to staff who can work at least a third of their usual hours
- Employers will pay staff for the hours they do work
- For the hours employees can’t work, the government and the employer will each cover one third of the lost pay
- The grant will be capped at £697.92 per month
- All small and medium sized businesses will be eligible for the scheme
- Larger business will be eligible if their turnover has fallen during the crisis
- It will be open to employers across the UK even if they have not previously used the furlough scheme
- The scheme will run for six months starting in November
Business lobby group the CBI welcomed the government’s plan.
“It is right to target help on jobs with a future, but can only be part-time while demand remains flat. This is how skills and jobs can be preserved to enable a fast recovery, “said CBI director-general Dame Carolyn Fairbairn.
However, Torsten Bell, chief executive of the Resolution Foundation think tank said that the new jobs scheme on its own “will not encourage firms to cut hours rather than jobs because the one-third employer contribution means it is much cheaper for firms to employ one person full-time than two people part-time”.
“But interaction with the £1,000 Job Retention Bonus is really important here,” he said. “When this new scheme is combined with that we’ve now got a big incentive for firms to retain workers part-time until you qualify for the bonus, i.e. the end of January is the new end of October cliff-edge.”
Tracey Sheppard is a cleaner at a leisure centre in Essex who’s been on furlough since the end of March. She said she hoped the new Jobs Support Scheme will help her, but there are no guarantees.
“They’re a very big company that I work for … but I don’t’ know whether they’d be able to afford to keep me on… I just don’t know,” she told the BBC’s World At One.
She said she feels…
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