The job retention scheme – which sees staff at firms furloughed but paid 80 per cent of their salaries – will now carry on into June, it was confirmed this afternoon.
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It was going to end on May 31, and without the security of the government backed cash many struggling companies would have to lay off staff.
Under current employment laws, companies have to issue 45 days notice before cutting roles – meaning letters could be sent to workers starting from tomorrow if the scheme ended.
Rishi Sunak said today he will expand the scheme for one more month, after First Secretary of State Dominic Raab announced an extension to the lockdown yesterday.
He said this afternoon: "We’ve taken unprecedented action to support jobs and businesses through this period of uncertainty, including the UK-wide Job Retention Scheme.
"With the extension of the coronavirus lockdown measures yesterday, it is the right decision to extend the furlough scheme for a month to the end of June to provide clarity.
"It is vital for people’s livelihoods that the UK economy gets up and running again when it is safe to do so, and I will continue to review the scheme so it is supporting our recovery."
The extension will cost an extra £10bn – with the scheme already costing the taxpayer between £30bn and £40bn between March and the end of May.
It's thought the scheme will be reviewed each month from now on.
Earlier this week the scheme was extended – allowing up to 200,000 extra people to benefit by changing the cut off date to March 19.
How does the furlough scheme work?
ANY UK organisation with employees can apply, including businesses, charities, recruitment agencies and public authorities.
It’s up to your place of work to apply to the scheme, meaning you won’t need to contact the government yourself.
To access the scheme, your employer must comply with the following:
- Designate employees who cannot do their jobs due to the coronavirus measures put in place by the government
- Notify those employees of their new “furloughed” status
- Submit information to HMRC about furloughed employees to set up a system for reimbursement and about existing systems that will facilitate payments
To be furloughed, you must now have been on a payroll on March 19.
Workers can ask previous employers to rehire and furlough them, even if they left for another job, but firms don’t have to do this.
Confederation of British Industry head Carolyn Fairbairn said the Government needs to take action to protect staff saying earlier: "This is quite urgent."
Phil Pepper, head of employment at law firm Shakespeare Martineau, said: "Those organisations which currently can't afford to pay wages and salaries after the May stop date will have to start
considering making job cuts now.”
Earlier No10 made it clear that anyone who was made redundant would not be forced out of their job while the scheme is still active.
A Downing Street spokesman said: "The Chancellor has said that the scheme is open for an initial three months but he will review extending it for longer if that is necessary."
He added: "If the Job Retention Scheme is extended, any negotiations that are under way would be paused and the furlough period of those employees would continue."