THE end of the furlough scheme in October will make 1.2million Brits unemployed by Christmas, an economic think tank has warned.
The National Institute of Economic and Social Research (NIESR) said the end-date is “a mistake” that could see unemployment rise to 10 per cent by the end of the year.
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This equates to an average unemployment rate of 6 per cent during 2020 – up from the 3.9 per cent rate in the three months to May.
The latest furlough figures show 9.5million people are using the scheme, at a total cost of £31.7billion to the Treasury.
But those figures are likely to drop over the coming months, the NIESR said.
The furlough scheme is being wound down from August when businesses have to pay national insurance (NI) and pension contributions.
Can I be made redundant if I’m on furlough?
EVEN though furlough is designed to keep workers employed, unfortunately it doesn’t protect you from being made redundant.
But it doesn’t affect your redundancy pay rights if you are let go from your job amid the coronavirus crisis.
Your employer should still carry out a fair redundancy process.
You will be entitled to be consulted on the redundancy lay-off first and to receive a statutory redundancy payment, as long as you’ve been working somewhere for at least two years.
How much you’re entitled to depends on your age and length of service, although this is capped at 20 years. You’ll get:
- Half a week’s pay for each full year you were under 22,
- One week’s pay for each full year you were 22 or older, but under 41,
- One and half week’s pay for each full year you were 41 or older.
Sadly, you won’t be entitled to a payout if you’ve been working for your employer for fewer than two years.
There should be a period of collective consultation as well as time for individual ones if your employer wants to make 20 or more employees redundant within 90 days or each other.
You are also entitled to appeal the decision by claiming unfair dismissal within three months of being let go.
If you’re made redundant after your company has gone into administration you can claim redundancy pay via Gov.uk.
Then from September, they will have to pay 10 per cent of salaries, plus NI and pension contributions.
In October, businesses will have to pay 20 per cent of salaries, plus NI and pension contributions. At the end of October the scheme will end.
The think tank is now urging the government to extend the scheme until the middle of next year in a bid to save jobs.
It argued that extending the support would dramatically cut the number of redundancies and would probably pay for itself.
It said that if the government continues with current plans, unemployment will recede as the recovery gathers speed in 2021 but will remain above its recent level of around 4 per cent.
The report comes as the Office for Budget Responsibility (OBR) recently predicted that unemployment in the UK could TREBLE this year to 3million, up from 1.3million in 2019.
Unemployment has already risen by 649,000 workers since lockdown with the coronavirus crisis claiming an 74,000 extra jobs last month.
Garry Young, NIESR deputy director, said: “The planned closure of the furlough scheme seems to be a mistake, motivated by an understandable desire to limit spending.
“The scheme was intended by the chancellor to be a bridge through the crisis, and there is a risk that it is coming to an end prematurely and this increases the probability of economic scarring.
“The scheme has been an undeniable success in terms of keeping furloughed employees attached to their jobs.”
The think tank also forecast that UK GDP is set to fall by 10 per cent in 2020, before increasing by 6 per cent in 2021.
The latest GDP figures show that the UK economy grew by 1.8 per cent in May as coronavirus lockdown restrictions were eased.
The Treasury told The Sun the furlough scheme will have protected millions of jobs for eight months when it comes to a close.
It added: “It is in no-one’s long term interests for the scheme to continue forever and right that state support is slowly reduced as we focus on getting furloughed employees back to work.
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“As part of the next phase of our economic plan to rebuild and recover the country’s economy, we recently announced our plan for jobs.
“We have made up to £30billion available to support, protect and create jobs, helping ensure people and businesses can come back from this crisis.”
In July, chancellor Rishi Sunak announced that businesses which re-employ furloughed staff will get a £1,000 bonus per employee from the government.