Government announces furlough scheme extension

Julian Cox, employment law specialist and partner at law firm BLM, said:

“Extension of the furlough scheme to March 2021 will be welcome news to many UK businesses, particularly for those forced to close due to the national lockdown. In essence, it is a mirror of the scheme announced in March 2020, providing far more support than the now-redundant Job Support Scheme unveiled in August and September.

“There is no requirement for employers to contribute to wages under these updated rules – a crux of the previous scheme as it began to wind down – although this furlough scheme is not without its problems. Businesses are still expected to provide national insurance and pensions contributions, whilst paid holiday also continues to accrue.

"Whilst today's announcement could act as a lifeline for some, it fails to address a number of other challenges facing businesses. Rent on commercial premises is also still due for many, with non-staff costs building up in the meantime. Impacted businesses must continue to weigh up options that guarantee their long-term survival and viability.

“Hospitality has been particularly hard-hit by the pandemic, with capacity reduced due to social distance guidelines, restrictions on households mixing, the curfew and another period of forced closure due to lockdown. Further, in some cases, the lion’s share of staff wages is based on Tronc – better known as tips or service charges – which is not covered by the scheme. Tax must be payed on Tronc, so why should it not be included as part of furlough calculations? It could mean many hospitality staff face a massively reduced wage.

“To add to these pressures, the sector was also battling with a perception that hospitality venues were a primary source of COVID infections prior to lockdown, having an even more devastating impact on footfall. There will be many in the industry asking why the sector seems to have been scapegoated and bear the economic brunt of lockdown measures."

Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of BLM. Specialist legal advice should always be sought in any particular case.

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