The furlough scheme has been extended to the end of October, but staff will be able to return to work part-time from August.
The changes to the Coronavirus Job Retention Scheme were announced in the House of Commons by chancellor Rishi Sunak this afternoon, after concerns were raised about the impact removing the support too early would have on jobs.
Sunak said at least 7.5 million people in the UK had been furloughed, with around one million businesses supported.
He said: “We believe in the dignity of work and we are doing everything we can to protect people currently unable to work.
“And as we reopen the economy we will need to support people back to work, and we will do so in a measured way.
“I can announce today that the job retention scheme will be extended for four months until the end of October. By that point we will have provided eight months of support to British people and businesses.
“Until the end of July there will be no changes whatsoever. Then from August to October, the scheme will continue for all sectors and regions of the UK, but with greater flexibility to support the transition back to work; employers currently using the scheme will be able to bring furloughed employees back part time.”
He said full details about the changes will be published by the end of May. The level of support will remain at 80% of furloughed workers’ salaries, but employers will be asked to share “the cost of paying people’s salaries” with the government.
Dame Carolyn Fairbairn, the CBI’s director-general, said: “As economic activity slowly speeds up, it’s essential that support schemes adapt in parallel. Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs.
“Introducing much needed flexibility is extremely welcome. It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation. That’s essential as the UK economy revives step-by-step, while supporting livelihoods.”
Dame Carolyn stressed that firms want more detail on how they will contribute to the scheme in the future. “The government must continue to keep a watchful eye on those industries and employees that remain at risk. All schemes will need to be kept under review to help minimise impacts on people’s livelihoods and keep businesses thriving,” she added.
Mike Cherry, national chairman of the Federation of Small Businesses, welcomed the furlough extension, adding: “Small employers have told us that part-time furloughing will help them recover from this crisis and it is welcome that new flexibility is announced today”.
The government added that it will explore ways through which furloughed workers who wish to do additional training or learn new skills are supported during this period.
British Chambers of Commerce director general Adam Marshall said: “The changes planned will help businesses bring their people back to work through the introduction of a part-time furlough scheme. We will engage with the Treasury and HMRC on the detail to ensure that this gives companies the flexibility they need to reopen safely.
“Over the coming months, the government should continue to listen to business and evolve the scheme in line with what’s happening on the ground. Further support may yet be needed for companies who are unable to operate for an extended period, or those who face reduced capacity or demand due to ongoing restrictions.”
On Sunday, the Prime Minister said the government would like people who are unable to work from home to start returning to their workplaces from Wednesday. Detailed guidance on how eight workplaces, from restaurants offering takeaway to offices and call centres, was published yesterday.
Beth Hale, partner and general counsel at CM Murray, said: “The ongoing uncertainty and fear of the ‘Furlough cliff edge’ was leading some employers to consider redundancies, particularly given the lengthy consultation periods required for collective redundancies.
“It is also extremely welcome that the Chancellor has indicated that some employees on furlough will be able to work part time – this will allow employers to build up gradually to a full return. However, there is still significant uncertainty about how the scheme may change and the level of contribution that may be required from employers – the devil for employers will, as always, be in the detail.”
Torsten Bell, chief executive of the Resolution Foundation think tank, said the Coronavirus Job Retention Scheme should be phased out gradually.
“Moving too quickly could spark a huge second surge in job losses at a time when unemployment already looks set to be at the highest level for a quarter of a century,” he said.