UK Edition
Up to 100,000 workers are falling through cracks in the state-backed furlough scheme according to a damning new report.
It is feared that swathes of employees will miss out on taxpayer support through the scheme because of a loophole ruling out people who started a new job in March but joined too late to be included in that month's payroll tax submission.
Any of these employees who have been put on temporary leave will be unable to get help from the Government - and may instead have to survive on much lower Universal Credit benefits.
On Friday, the Government also announced that furloughed workers who take paid parental or adoption leave while they are off work will be entitled to pay based on their usual earnings rather than their furloughed pay rate.
This will mean some furloughed workers could end up receiving more than the maximum £2,500 per month usually available under the scheme.
It came as the beleaguered hospitality industry renewed its call for tips received by bar and restaurant staff and paid through the payroll to be reflected in their furlough payments.
HMRC said it had received furlough claims for another 600,000 workers on Thursday taking the total to 3.8 million withing four days of applications opening.
Claims to date will cost taxpayers £4.5bn, a figure that is set to rise as firms furlough more staff or make additional claims for workers already on taxpayer-funded leave.
But concerns persist over job movers who have missed out on the scheme. Analysis by the Institute for Employment Studies (IES) of official data shows about half a million people start new jobs each month, of whom three-quarters are paid monthly.
An Office for National Statistics (ONS) survey suggests that 27pc of the total workforce was already furloughed by April 5. This number is likely to include about 100,000 ineligible workers, the IES said.
The job retention scheme was announced last month by Chancellor Rishi Sunak and provides taxpayer funding for 80pc of employees' wages up to £2,500 a month while they are not working.
The aim is to avoid a jobs meltdown like the one in America, where unemployment claims have surged by 26.4 million in the five weeks since Covid-19 struck.
However, workers who started with a new employer in March but were not included on a pay-as-you-earn submission before the March 19 cut off date do not qualify to be furloughed by their new company.
Tony Wilson, director of the IES, called for the cut off date to be extended to the end of March.
“These people can of course claim universal credit, but it’s becoming clearer by the day that this isn’t proving adequate, even with the welcome increases announced last month,” he said.
Treasury fears that extending the date could allow fraudsters to game the system by submitting sham claims.
Thousands of workers are likely to have been caught out because they had left an old job but not yet started their next one when the lockdown began.
Kate Benjamin worked on shop layouts for Anthropologie at Selfridges in London until March 13 and was due to join flower display designer Early Hours ten days later.
Given the pandemic emergency, Early Hours asked to postpone Ms Benjamin’s start date.
She approached Selfridges to rehire her so that she could be furloughed but the firm said it was unable to help.
In an email, the company said: “We are not sure how long this situation will go on for, or what the overall impact on Selfridges will be which is why we have made some extremely difficult decisions.”
Ms Benjamin said she felt humiliated, demoralised and upset by the situation. The company did not respond to a request for comment.
Meanwhile, low-paid waiters and bar staff who rely on tips as part of their regular income are also being short-changed by the scheme.
The hospitality industry has been among those hit hardest by the shutdown, with four in five workers already furloughed by April 5 as cafés, restaurants and bars across the country were forced to close according to the ONS.
Thousands of employees in the sector rely on ‘tronc’ – a special pay arrangement used by employers to distribute tips, gratuities and service charges to staff – for up to 40pc of their income.
But updated Government guidance this week said this money cannot be taken into account when calculating furlough payments.
Kate Nicholls, chief executive of UKHospitality, said tronc income should be included when calculating payments under the furlough scheme.
She said: "Staff earn tips through hard work and skilled service, and should not be put at a disadvantage at such a perilous time for both businesses and employees.
"Money paid into a tronc scheme is a taxable earning – there is a record of it already and the Treasury has taken its share. Employees should therefore be entitled to feel the benefit of their hard work when the need is most dire."
Almost 23,000 people have signed a petition on website Change.org calling for the Chancellor to extend the scheme to take account of tronc payments.
Some low-paid workers have been dealt a double blow as the 6.4pc rise in the national living wage to £8.72 an hour on April 1 will not be taken into account if they were furloughed before that date.
A Treasury spokesman said the job retention scheme was just one part of the steps taken to support the economy. He said: “This includes targeted support for the hospitality sector with business rates holidays, VAT deferrals, eviction protection and over £6bn worth of cash grants of up to £25,000 for eligible firms.”
Meanwhile, credit ratings agency Moody’s said the Government’s measures to support businesses, including grants, business rates holidays and state-guaranteed loans will protect restaurants' and pubs' liquidity.
David Beadle, senior credit officer at Moody’s, said: "While the immediate revenue hit that UK restaurant and pub companies suffered from coronavirus has eroded their credit quality, government relief measures will help them minimise cash burn during the closure period."
"However, social distancing measures will likely delay a return to pre-crisis trading levels, which may also be held back by weak consumer sentiment."