Call for measures to stem unemployment and support directors as furlough winds down

  • 02 Sep 2020

The Coronavirus Job Retention Scheme continues to wind down, with employers now having to contribute to furloughed workers’ wages.

Since March the government has paid 80% of furloughed workers’ wages up to £2,500 a month and from 1 August businesses began to pay employers’ pension and national insurance contributions. But from 1 September, the government’s contribution reduces to 70%, with the employer paying 10%.

Responding to the changes to the Job Retention Scheme, Federation of Small Businesses (FSB) National Chairman Mike Cherry said: “The Job Retention Scheme has been a huge success, protecting livelihoods and the futures of businesses all over the country. We now have to avoid a scenario where its wind down triggers mass unemployment.  

“Sadly, thousands of jobs have already been lost. This crisis has changed the commercial world for the long-term and future job creation now has to be a priority, particularly for those who are currently out of work.

 

“The ability to furlough, while vital, does nothing to reduce the costs and risks that come with taking on new personnel. The cost of running a small firm has increased by at least £60,000 since 2011 – an increase largely driven by spiralling employment costs.

“Small firms employ 60% of the private sector workforce. If we want them creating new, future-proofed roles, we have to bring down the upfront costs of hiring. That starts with reducing Employer National Insurance Contributions, which serves as a jobs tax, by cutting rates or increasing the targeted Employment Allowance. As the Job Retention Scheme is brought to an end, NICs should be brought down to protect jobs.

“Swift implementation of, and straightforward access to, the Government’s new apprenticeship, traineeship and Kickstart initiatives is also a must.    

“Equally, many will now be looking to strike out on their own, as was the case following the financial crash, so we need to see expansion of the Start-Up Loans and New Enterprise Allowance programmes.

“As the Job Retention and Self-Employment Income Support Schemes are brought to an end, it’s important to remember that many have not been helped by either. Thousands of company directors – who have contributed corporation and dividend tax for years – have been left with no help whatsoever for over five months, a fate also suffered by the newly self-employed and sole traders earning over £50,000.

 

“At the very least, we believe it is time for the Government to bring forward a rescue package for those who have been left out. We look forward to a truly pro-business Budget in the months ahead. Now is not the time for measures that will stifle a small business community that will be central to our economic recovery.”   

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