UK set to ask employers to pay 20 to 30 per cent of furlough wages from August

THE UK has drawn up plans to require employers to cover 20 to 30 per cent of furloughed employees' wages from August to reduce the vast burden of the coronavirus crisis on government finances.

Rishi Sunak had extended the job retention scheme -- the centrepiece of the government's attempts to cushion the coronavirus hit to the economy -- by four months on May 12.

The chancellor, however, told companies they would have to start sharing the cost of the scheme from August, although the government would still take on "the lion's share" of the cost.

"The Treasury has drawn up plans that would require employers to cover between 20 and 30 per cent of people’s wages," The Times reported on Saturday (23). "They would also be required to cover the cost of employer’s national insurance contributions, on average 5 per cent of wages."

A Treasury source added: “We’ve got two full months of support left and afterwards the government will help to pay people’s wages, but it’s fair to everyone that businesses contribute as they get back to work.”

The chancellor is expected to announce the changes next week.

On Friday, he had warned that Britain was facing a "very serious economic crisis" and jobs would be lost in the "days, weeks and months to come".

Reports warned of the looming surge in redundancies.

"There's no two ways about this there will be fewer jobs in retail as we emerge out of this crisis," Richard Lim, chief executive of Retail Economics, told MailOnline.

"There will be administrations that are yet to happen. The government's support measures are providing a lifeline to keep businesses afloat and preserve cash and continue to operate and allow them the working capital to do that."

The Institute of Directors sought "further clarity" around employers contributions.

"Many firms that would normally be on strong footing are still in dire straits," it noted.

Edwin Morgan, Director of Policy, added: "Firms don't want to be as reliant on government support as they are at the moment, but the response to coronavirus has shut down much of the economy.

"It's important the government designs changes to support programmes with care, because winding them down will inevitably force companies to make difficult choices around whether they can keep staff on if demand hasn't returned."

The Financial Times had recently quoted a business leader stressing that if the furlough scheme was "paying for jobs that don’t really exist, it’s better to release people into the job market to start looking for other work".

Last week, Sunak had told Parliament that the government had "stretched and strained to be as generous as possible" towards employers and employees.

"This scheme is expensive," he said. "It is the right thing to do - the cost of not acting would have been far higher - but it is not something that can continue indefinitely into the future."