Data must be reviewed before further furlough changes - Chamber

The Government must continue to review the data before making further increases to employers ' furlough contributions, business leaders said today.

The furlough scheme is set for its biggest change since being reintroduced in November 2020, with employers having to shoulder more of the costs from today.

Companies will need to contribute a minimum of 10 per cent towards the pay of furloughed staff, with the Government topping up the remaining 70 per cent.

In August, company payments will increase to 20 per cent, with the Government paying 60 per cent.

Greater Birmingham Chambers of Commerce said that while the Government faces a difficult balancing act, some firms will not be able to afford the additional costs of increased furlough contributions.

Today also marks the end of business rates exemptions and VAT deferrals, as well as further changes to EU trading rules taking effect.

Head of policy Raj Kandola (pictured) said: “As national restrictions continue to ease and 19 July edges ever closer, a return to some form of normalcy appears to be tantalisingly close.

“However, many businesses still find themselves in a precarious position given the severity of the crisis - particularly those that are forced to remain closed and have received relatively little government support.

“In this context, the importance of the furlough scheme remains huge - it has literally protected thousands of jobs across the country and saved many businesses from going to the wall.

“The Government has been clear that at some point the spending taps would need to be switched off in order to tackle the huge deficit in the country's finances and this is the first step on what is likely to be a difficult journey.

“Data from our latest Quarterly Business Report that just over a third of local firms saw their cash flow position worsen over the last three months which simply underlines the fragile state of the situation.

“Put simply, many businesses will struggle to afford the additional costs they will need to pay which ultimately will result in more job losses and in some cases, permanent closures.

“Throughout this crisis, the Treasury has demonstrated a willingness to adapt its approach when things aren't working properly - the introduction of the bounce back loans and extending business rates holidays are pertinent examples.

“We would urge the Government to review the data in a month's time before taking any further decisions on increasing employer contributions in August otherwise any positive sentiment generated by unlocking the economy in late July could quickly dissipate.

“As always, our Covid-19 Support Grid sets out the latest advice and guidance on how businesses can access Government support - full details can be found on our website."

Meanwhile, legal experts are encouraging furloughed workers to scrutinise their rights to redundancy and holiday pay, in light of changes to the scheme.

Michael Hibbs, employment law expert and partner at Shakespeare Martineau, says there are a number of legal issues that could arise, should companies make redundancies as a result of the changes.

These include:

• If redundancies are made, staff are entitled to a full notice period and receive 100 per cent of their full pay during this time;
• Individual consultations are required before notice can be given and when there are 20 redundancies or more across an establishment collective consultation is required;
• Employees are entitled to be paid in full when looking to take annual leave. Therefore, if an employee was to take their holiday while being furloughed, they must be paid in full. This includes all accrued holiday up to the redundancy termination date and
• Those returning from furlough can carry over any holiday allowance into the next holiday year.

Mr Hibbs, who is a member of Birmingham Law Society, said: “The next few months are going to see the most significant changes to the furlough scheme since it was reintroduced in November.

“As a result, we could see staff being unfurloughed and being placed at risk of redundancy. Therefore, it is critical that employers and employees both understand their rights when it comes to the scheme, including those surrounding redundancy and holiday pay entitlements. ”