Furloughed staff may be allowed to return to car dealerships on a part-time basis when the current scheme ends in June.
Car dealers and the wider business community fear a ‘cliff-edge’ ending to the furlough scheme, where the government withdraws all support, would result in huge redundancies.
Car Dealer Magazine reported this week that dealer groups are already consulting staff over job losses – with some bosses predicting redundancies of 25 per cent.
As firms begin to get slowly back to work, a part-employer part-government funded return could allow businesses to ramp back up without the pressure of laying staff off.
The Financial Times reported this weekend that ministers have signalled to business leaders that the furlough scheme could be gradually phased out over the summer, rather than ending abruptly.
The Federation of Small Businesses’ Craig Beaumont told the paper: ‘We really hope to see progress made on part-time furlough because smaller businesses in particular benefit from being able to quote for new work, keep in touch with employees and pay their invoices.’
Business secretary Alok Sharma has told business groups that plans to extend the furlough scheme are being considered by the Treasury.
Another idea being floated for the scheme is to reduce the government’s contribution to the furlough amount paid from 80 per cent of an employee’s wages up to £2,500 a month, down to 60 per cent.
The chancellor Rishi Sunak has promised there will not be a ‘cliff edge’ ending to the scheme.
Speaking to ITV News earlier this week, he said: ‘To anyone who is anxious about this I want to give them reassurance there will be no cliff-edge to the furlough scheme. I am working as we speak to work out the most effective way to wind down the scheme and ease people back into work.’
Yesterday I told ITV News that there will be no cliff edge to the Coronavirus Job Retention Scheme.
But as some scenarios show we are potentially spending as much on the furlough scheme as we do on the NHS, I am working out the most effective way to ease people back into work. pic.twitter.com/O3FhqJ0qFM
— Rishi Sunak (@RishiSunak) May 5, 2020
Currently there are more than 6m workers on the furlough scheme from 800,000 businesses.
Clarification on what happens next is needed ahead of May 15 – that’s the 45-day deadline day for consultations on mass redundancies to begin ahead of the current scheme’s planned ending on June 30.
The Telegraph reported furlough could move to a part-time basis too – mimicking the German ‘Kurzarbeit’ scheme, where the state and employers split payments above a certain level.
The challenge the government will face, though, will be how to offer aid to the industries that need it most.
The hospitality industry in particular could face huge job losses as restaurants, bars and pubs are likely to be forced to remain closed for the foreseeable future.
Accountant David Kendrick, a partner at UHY Hacker Young, told Car Dealer this week that staff costs are the biggest outgoing for dealers and job losses are highly likely.
He said: ‘Some of the losses these businesses may incur when reopening takes place could be significant and unfortunately staff wages are one of the largest costs the businesses carry. Redundancies are inevitable I am afraid to say.’
An announcement on what happens next to the furlough scheme is expected this week.
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