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30 April, 2020 Open access

HMRC should amend the ‘furlough scheme’ to allow for short-time working during the COVID-19 outbreak, says Reform think tank

Change to the Coronavirus Job Retention Scheme would allow employees to continue to do some work, and give businesses greater flexibility to respond to the impacts of the crisis

HMRC should amend the 'furlough scheme' to allow for short-time working during the COVID-19 outbreak, the Reform think tank has said.

Announced by the Chancellor Rishi Sunak on 20 March 2020 and open for applications from 20 April 2020, the Coronavirus Job Retention Scheme provides employers with a grant to cover 80 per cent of the salary (up to a total of £2,500 a month) of workers who are not working, but who are furloughed and kept on the payroll rather than being laid off.

However, in new analysis that compares the UK's Job Retention Scheme with comparable countries' programmes of coronavirus-related employment support, Reform says that its main precondition, that the employee cannot work for the company to which they are furloughed, makes it an outlier. For example, Reform points to countries such as Sweden, Denmark, Germany and Canada that have implemented schemes which allow for employees to work for short periods while the government tops-up their salary.

As a result, Reform calls for a more flexible approach that would allow employees to continue to do some work and give businesses greater flexibility to respond to the impacts of the coronavirus -

'Currently, many businesses are facing an impossibly difficult decision. Either furlough staff in order to access state support, but drastically reduce their ability to continue. Or, do not furlough staff, have no access to state support, and attempt to maintain payroll even during an incredibly difficult economic period.

... Although there are broad parallels in international fiscal stimulus packages, the UK stands out for not allowing businesses to move employees to short-time working. This would enable greater business flexibility in adapting to reduced activity, ensure more people can continue to work – with the associated health and wellbeing benefits – and could make the transition from full to partial lockdown easier.'

For more information see Working through it: Assessing state employment support responses to the coronavirus from reform.uk