The UK government has been accused of giving tens of thousands of workers in new jobs “false hope” of getting support through its job protection scheme.
The Treasury said it had extended the cut-off date for its wage subsidy ‘furlough’ scheme on Wednesday 15 April, after facing a backlash for leaving out many newly hired workers.
On Wednesday officials announced an extension from 28 February to 19 March, in a move it “expected to benefit over 200,000 employees.”
But experts, firms and MPs are warning the fine print of the announcement means many new starters in March will still be left with nothing.
‘It hoodwinked everybody, but it’s just a soundbite’
Richard Potter, director of a soft furnishings manufacturer and supplier, told Yahoo Finance UK he had a “moment of absolute elation” when he first heard the news.
He had recently made almost the entire workforce redundant at the newly launched company, but believed he could now re-hire and pay them as furloughed workers instead.
But Potter quickly realised the change made no difference at all for most of his staff. “We thought our prayers had been answered, but then had this crushing low. It hoodwinked everybody, but it’s just a soundbite.”
A Treasury spokesman said eligibility had been widened to “those employees taken on up until 19 March,” but close examination of its press release shows the cut-off date has not actually been extended for all workers.
They need to have not only started but also had their pay processed by 19 March, when many firms — including Potter’s — typically process pay at the end of the month.
MoneySavingExpert founder Martin Lewis has warned his calculations suggest more than half of new hires between 28 February and 19 March will not benefit, as their pay was not processed soon enough.
Those eligible will also be furloughed only if their employers agree to do so. Lewis said it made the extension “far from a panacea,” and called for more action to help new starters still missing out.
The estimated 200,000 newly eligible workers highlighted by the Treasury are understood to be workers who started but were not paid in February, rather than new hires in March.
‘We’ve been left high and dry’
For Potter, just seven days made all the difference between being able to keep all his staff on as furloughed workers and making “terrible” mass redundancies — including himself and two other directors.
His team are spread across two companies, RB Furnishings Ltd and RB Sewing Ltd, which only launched in February. Most staff began work in early March, but their pay data was only submitted to HMRC on 26 March just before payday.
One of the 39 staff Potter had to let go is Stew Dwyer, a graphic designer who found himself out of work within a month of starting.
He had been looking forward to a “nice steady wage” after previously working for himself, and said orders were stacking up before the coronavirus hit.
“We were having a cracking month, and without a shadow of a doubt the business will work. But then we had the rug pulled from under our feet,” said Dwyer.
Orders dried up fast as the lockdown forced the companies’ retail customers to shut their doors, and its directors now fear they may not even be paid for some orders already completed.
Dwyer said he was gutted when he heard about the initial February deadline on the radio, calling it a “random date plucked out of the air.”
“We’ve been left high and dry,” he added. If he were eligible for furlough, he could have received 80% of pay up to £2,500 a month through a government grant.
How furloughing can save jobs and firms
Dwyer praised his boss for speaking out and vowing to furlough staff immediately if the government caved in.
Potter is determined to keep the business afloat and hopes to re-employ many staff once business eventually begins to return to normal. Some may be back sooner, with plans to make gowns for NHS workers in the meantime.
But some may take other jobs and hiring takes time, whereas furloughing staff now would mean they could be up and running from “day one” after restrictions lift.
The director had to tell his staff the latest announcement was no help. He claimed the government’s language over the cut-off date is misleading, and gives workers “false hope.” He said even some MPs appeared to have misunderstood the announcement.
The Scottish National Party (SNP)’s Westminster leader Ian Blackford initially welcomed the changes on Wednesday, but later tweeted it was “now what it is cracked up to be.” Labour MP Kate Osborne has now written to the chancellor urging him to extend it further.
Martin Lewis warned in a Twitter video: “There was a loose indication [by the Treasury] this is a bigger solution than it was. It still will likely leave over 100,000 people missing out.”
How many people will really be helped by the chancellor extending the furlough cut off date from 28 Feb to 19 March. My video answer... pic.twitter.com/ZV1tbYBWWv
— Martin Lewis (@MartinSLewis) April 16, 2020
Fears unscrupulous firms could pocket furlough cash
Government officials are worried more flexible rules would increase the risk of fraud, however.
A Treasury spokesman said the scheme was protecting jobs and pay packets across the UK, but added: “We are offering support for thousands more, whilst keeping the significant fraud risks under control.”
The cut-off date for payroll submissions is now a day before the chancellor first unveiled the job retention scheme on 20 March. The fear is a later date would give dishonest employers the chance to ‘hire’ and immediately furlough workers to company payrolls solely to pocket the wage subsidies.
HMRC staff are understood to be worried about verifying whether claims filed after 19 March are genuine.
Potter is the first to acknowledge the risk, noting: “If I were unscrupulous, I could add everyone I know to payroll and pay them £2,500 a month.”
But he is calling for a case-by-case review for firms like his, as many employers will have significant evidence their staff actually started work before the scheme’s launch.
He added: “If there’s one thing HMRC do day in, day out, it’s check for fraud. Make people who defraud them pay, not people who got a new job in March.”