The coronavirus pandemic poses huge risks to workers’ health, jobs and livelihoods. Following consultation with trade unions, the chancellor announced a new job retention scheme on Friday 20 March.
This report sets out what government must do next to protect family incomes (building on our report published last week). Government must now:
On Friday 22 March the chancellor announced the Coronavirus Job Retention Scheme to provide wage support to workers who are temporarily laid off – or furloughed – due to coronavirus.
All businesses are eligible, and the scheme will support everyone on a company’s payroll. This should include most zero-hours workers – though not those who are self-employed.
Government guidance sets out that businesses must:
The guidance further says that HMRC will reimburse 80 per cent of furloughed workers’ wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
In announcing the scheme, the chancellor said that it the payments would be backdated to the 1 March, and initially available for three months. However, he said that he would extend the scheme for longer if necessary, and there would be no limit on the amount of payments. 1
The TUC believes that this scheme is a significant intervention. Employers in most industries should now use the scheme to maintain jobs. This level of support means there is no excuse for employers to make mass redundancies. Union reps should urgently open negotiations with employers about how they take advantage of the scheme and what that means for workers in practical terms.
But the scheme at present hasn’t provided protection for key groups, including the self-employed, those on sick pay, and parents who need to care for their children due to school closures.
In announcing the wage subsidy, the chancellor also added to the small-scale steps taken to provide additional support to households. Taking into account the announcements in the Budget and those on March 20:
Government has also announced a package of support for businesses:
Government support has gone some way to protect wages. But there are three important groups missing out who need assistance now.
It is an urgent priority to support the more than five million self-employed people who are not covered by the government’s job retention scheme. Measures taken last week – to delay the next self-assessment tax payment and ensure that self-employed people on low incomes can access support up to £94 a week through the benefit system – are clearly inadequate.
Industries with particularly high levels of self-employment include the creative industries (listed here in ‘other services’), agriculture, forestry and fishing and construction. These workers must not be left behind. See graph:
Number of workers by Industry sector (employed and self employed)
The Federation of Entertainment Unions has called for a guaranteed minimum income to support self-employed people during this period. It believes there are two ways this could be delivered – listed here in order of preference.
1) Guarantee self-employed people a significant percentage of their income based on their last three years of self-assessment income.
We believe that the most effective way to support the self-employed would be to put in place a scheme mirroring the support for employed workers, and guaranteeing at least 80 per cent of income up to a maximum of £2,500 a month.
HMRC already holds significant information about the earnings of the self-employed:
So, as in Norway, government could extend the job retention wage subsidy to the self-employed, paying at a rate of at least 80 per cent of income based on their previous three year’s self-assessment income.
Grant payments could then be made to self-employed people using their self-assessment tax details (in the same way a repayment would be made to someone who has overpaid tax).
Government could also consider scaling up the income assessment process used in universal credit to cover those applying to this scheme.
This would mirror schemes in other countries:
2) Provide a flat-rate payment to all self-employed people affected by coronavirus.
An alternative approach could be to provide a flat-rate payment to all self-employed people affected by coronavirus.
We believe this should be based on the equivalent of 35 hours work at the National Living Wage, or around £320 a week.
This payment could potentially be:
We believe there are some groups of workers who might be best covered by the existing job retention scheme. These include – but are not limited to:
Government should also ensure that employers are extending the protection of the job retention scheme to all workers – whatever their employment model – and clarify that its intention is to protect as many workers as possible.
As the health minister Matthew Hancock admitted this week on Question Time, £94 a week in sick pay is too low to live on.
Government’s priority should now be to increase urgently the weekly level of sick pay from £94.25 to the equivalent of a week’s pay at the Real Living Wage.
In addition, almost two million people are not eligible for sick pay, because they earn too little to qualify. In response to this problem, the government has increased the support available via universal credit – available to people who don’t get sick pay – to £94 a week.
But claiming benefits remains complex, and some people may miss out because their savings are too high, or because their household income pushes them over the income threshold – for example due to having a partner still in work.
Government needs to act now to remove the lower earnings limit for qualification for sick pay, and ensure everyone can access it, no matter how much they earn .
It is not yet clear whether the job retention scheme can be used to support parents who may need to not go to work due to school closures.
If this is not the case (given that it is linked to a reduction in business demand – rather than workers needing to be off work for other reasons), government must urgently introduce support for these workers (as we set out in our note):
With significant income drops likely, government urgently needs to design a wider package of support for households, in addition to wage subsidies and better sick pay. It should consult unions, employers and civil society on this, but measures could include:
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