Businesses may have to cover insurance and pensions of furloughed staff

Government considering asking small businesses to cover national insurance and pension contributions of furloughed workers from August onward

UPDATED: Rishi Sunak could ask thousands of small businesses to cover national insurance and pension contributions of staff on furlough from August.

Earlier this month, announcing the Coronavirus Job Retention Scheme would be extended until the end of October, the chancellor said that businesses would have to share some of the cost with government.

>See also: Rishi Sunak extends job retention furlough scheme to October

According to Bloomberg, one idea under consideration is asking small businesses to share the pain by covering national insurance contributions and auto-enrollment pension contributions of furloughed staff.

This would cost small business owners over £300 a month to keep an employee claiming the full £2,500 allowance on furlough. According to Ercan Demiralay, partner at Wellers, a small business owner would have to pay £245.73 in national insurance contributions and another £59.64 in pension contribution.

Over a million businesses have furloughed staff through the CJRS, which covers up to 80 per cent of an employee’s wages capped at £2,500 per month.

The fear is that asking mothballed businesses to cover national insurance and pension contributions will only hasten the inevitable redundancies when people come out of furlough. The gloomy prognosis is that a million or so workers currently furloughed have already lost their jobs but are being kept on furlough ventilator support.

>See also: Government launches business Coronavirus Job Retention Scheme

The government has been paying 80 per cent of the wages of about eight million workers. CJRS has cost more than £11bn and the bill is expected to reach £50bn by the end of July.

Employees have been promised they will continue to receive 80 per cent of their normal pay, up to a maximum of £2,500 a month, until the scheme is currently scheduled to expire in October.

Furlough ventilator

According to the Times, it is understood that another approach being discussed is requiring employers to contribute 20 per cent of wages, with the government covering 60 per cent.

Meanwhile, according to one source, the government is listening to the retail industry, and its own MPs, who question why part-time furloughed working is only being allowed in August, two months after the government has encouraged independent retail shops to reopen to cratered demand. Many independent shops are talking about only re-opening on certain days, in which case, bringing back workers full-time would be untenable. Bringing back furloughed workers part-time now would save the government money, they argue.

Further reading

7 ways to cut staff costs during the coronavirus crisis







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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...