Sunak’s “sink or swim” Job Support Scheme more costly to employers than international equivalents

The Chancellor’s Job Support Scheme makes it more expensive for employers in some of the sectors hardest hit by the Covid-19 crisis to bring back workers part time than comparable international programmes, Labour can reveal.

New analysis of Coronavirus wage support schemes by Labour compares the difference in wage costs between employing two workers on half time and one on full-time working hours across the arts, hospitality and manufacturing sectors.

It shows that employers who want to bring two staff back for half the working week, instead of keeping one employee on full-time and letting the other go, face much higher wage costs in the UK than they would in France, the Netherlands and Germany.

Across these three sectors, the difference in costs of employing two staff on half hours versus one on full-time hours is more than twice as large in the UK than it would be in France and two-thirds higher than in the Netherlands.

Employers in Germany pay no contribution to non-working hours at all, so bringing back two staff for half the week costs exactly the same in wage costs as bringing back one full time regardless of the sector.

Even if the two UK workers qualify for the £1,000 Jobs Retention Bonus on top of the Job Support Scheme payment, wage costs remain significantly higher. The Chancellor’s scheme therefore penalises employers for bringing two workers back part-time more than any of these equivalents.

In France the employer pays 14% of hours not worked and in the Netherlands the size of the subsidy depends on the fall in turnover. By contrast, UK employers have to pay a third (33%) of wages for hours not worked by an employee. Bringing back two workers on a part-time basis means they have to pay that cost twice.

That makes it significantly more expensive than bringing one worker back full-time and firing the other – with or without the Jobs Retention Bonus.

In the middle of September an estimated 2.8 million SME employees were still furloughed under the Coronavirus Job Retention Scheme. Labour called for a Job Recovery Scheme to enable businesses in key sectors to allow staff to work reduced hours, with government backing wages for the rest of the week.

Labour’s scheme would be designed to reward companies who bring back more workers part-time, rather than bringing some back full time and letting others go.

Anneliese Dodds MP, Labour’s Shadow Chancellor said:

“The Chancellor should have introduced a Job Recovery Scheme that incentivised employers to keep more staff on. Instead, his Job Support Scheme makes it more expensive to bring staff back than many other international schemes.

“Viable businesses just need support to cope with the restrictions the Government has imposed on them. They pinned their hopes on the Chancellor to deliver, but he’s forcing them to flip a coin over who stays and who goes.

“This wasn’t by accident – it was by design. The Chancellor’s sink or swim Job Support Scheme is a throwback to the worst days of Thatcher, and just like in the 1980s people on the lowest incomes will pay the highest price.”

Ends

Notes to editors

• The table below shows the difference in wage costs between bringing one employee back full-time or two back part-time on half hours that for an employer facing a 50% reduction in turnover under the UK Job Support Scheme and comparable short-time working schemes in the Netherlands, France and Germany.

• Examples are shown for three sectors, using median full-time weekly gross wages of these sectors published in the Annual Survey of Hours and Earnings 2019: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2019

• Details of how the UK and other schemes work were requested from the House of Commons Library:

UK: For hours not worked: the employer pays 33% and the Government pays 33%. The Government will also pay a £1,000 bonus to employers for each formerly furloughed employee they retain until 31 January 2021.

Netherlands: The employer must continue to pay their employees in full. Although they are allowed to make redundancies, employers must continue to pay 90% of their total wage bill between October and December. The Government pays employers a subsidy for the total wage bill calculated based on the employer’s loss in turnover. For 50% loss of turnover subsidy is: 40% (Oct-Dec).

France: For hours not worked, employers must pay 70%. The Government reimburses employers 56% of gross pay

Germany: For hours not worked: Employers pay 0% and the Government pays 60%