Employer contribution cuts could save three times more UK jobs, thinktank says

The government would save taxpayers’ money and 1.4 million people might keep their jobs if the wage subsidy for firms using the coronavirus short-time working scheme was increased, Rishi Sunak has been told.

The New Economics Foundation (NEF) said as many as 2.7 million people will be at risk of redundancy this winter when the government winds down the furlough scheme next week and replaces it with the job support scheme (JSS), the plan to protect people in “viable” jobs, which the chancellor announced last month.

The thinktank said as few as 500,000 of these jobs would be saved by the new scheme of wage subsidies, which offers firms a government contribution to the wages of staff working shorter working hours during the Covid crisis.

Under the government’s plans, the Treasury will cover a third of an employees’ wages while they are off work, and their employer has to contribute the same amount to get the state support, maintaining the worker’s pay packet at 77%.

However, the NEF said cutting employer contributions from 33% to 10% would have a dramatic effect, helping to save as many as 1.4m jobs – almost triple the number of jobs it estimated the JSS would support.

Marston's - 2,150 jobs
15 October: Marston's  - the brewer which owns nearly 1,400 pubs, restaurants, cocktail bars and hotels across the UK - said it would cut 2,150 jobs due to fresh Covid restrictions. The company has more than 14,000 employees.

Whitbread - 6,000 jobs
22 September: Whitbread, which owns the Premier Inn, Beefeater and Brewers Fayre chains, said it would cut 6,000 jobs at its hotels and restaurants, almost one in five of its workforce

Pizza Express – 1,100 jobs
7 September: The restaurant chain confirms the closure of 73 restaurants as part of a rescue restructure deal.

Costa Coffee – 1,650 jobs
3 September: The company, which was bought by Coca-Cola two years ago, is cutting up to 1,650 jobs in its cafes, more than one in 10 of its workforce. The assistant store manager role will go across all shops.

Pret a Manger – 2,890 jobs
27 August: The majority of the cuts are focused on the sandwich chain's shop workers, but 90 roles will be lost in its support centre teams. The cuts include the 1,000 job losses announced on 6 July.

Marks & Spencer – 7,000 jobs
18 August: Food, clothing and homewares retailer cuts jobs in central support centre, regional management and stores.

M&Co – 400 jobs
5 August: M&Co, the Renfrewshire-based clothing retailer, formerly known as Mackays, will close 47 of 215 stores.

WH Smith – 1,500 jobs
5 August: The chain, which sells products ranging from sandwiches to stationery, will cut jobs mainly in UK railway stations and airports.

Dixons Carphone – 800 jobs
4 August: Electronics retailer Dixons Carphone is cutting 800 managers in its stores as it continues to reduce costs.

DW Sports – 1,700 jobs at risk
3 August: DW Sports fell into administration, closing its retail website immediately and risking the closure of its 150 gyms and shops.

Marks & Spencer – 950 jobs
20 July: The high street stalwart cuts management jobs in stores as well as head office roles related to property and store operations.

Ted Baker – 500 jobs
19 July: About 200 roles to go at the fashion retailer’s London headquarters, the Ugly Brown Building, and the remainder at stores.

Azzurri – 1,200 jobs
17 July: The owner of the Ask Italian and Zizzi pizza chains closes 75 restaurants and makes its Pod lunch business delivery only

Burberry – 500 jobs worldwide
15 July: Total includes 150 posts in UK head offices as luxury brand tries to slash costs by £55m after a slump in sales during the pandemic.

Boots – 4,000 jobs
9 July: Boots is cutting 4,000 jobs – or 7% of its workforce – by closing 48 opticians outlets and reducing staff at its head office in Nottingham as well as some management and customer service roles in stores.

John Lewis – 1,300 jobs
9 July: John Lewis announced that it is planning to permanently close eight of its 50 stores, including full department stores in Birmingham and Watford, with the likely loss of 1,300 jobs.

Celtic Manor – 450 jobs
9 July: Bosses at the Celtic Collection in Newport, which staged golf's Ryder Cup in 2010 and the 2014 Nato Conference, said 450 of its 995 workers will lose their jobs.

Pret a Manger – 1,000 jobs
6 July: Pret a Manger is to permanently close 30 branches and could cut at least 1,000 jobs after suffering “significant operating losses” as a result of the Covid-19 lockdown

Casual Dining Group – 1,900 jobs
2 July: The owner of the Bella Italia, Café Rouge and Las Iguanas restaurant chains collapsed into administration, with the immediate loss of 1,900 jobs. The company said multiple offers were on the table for parts of the business but buyers did not want to acquire all the existing sites and 91 of its 250 outlets would remain permanently closed.

Arcadia – 500 jobs
1 July: Arcadia, Sir Philip Green’s troubled fashion group – which owns Topshop, Miss Selfridge, Dorothy Perkins, Burton, Evans and Wallis – said in July 500 head office jobs out of 2,500 would go in the coming weeks.

SSP Group – 5,000 jobs
1 July: The owner of Upper Crust and Caffè Ritazza is to axe 5,000 jobs, about half of its workforce, with cuts at its head office and across its UK operations after the pandemic stalled domestic and international travel.

Harrods – 700 jobs
1 July: The department store group is cutting one in seven of its 4,800 employees because of the “ongoing impacts” of the pandemic.

Harveys – 240 jobs
30 June: Administrators made 240 redundancies at the furniture chain Harveys, with more than 1,300 jobs at risk if a buyer cannot be found.

TM Lewin – 600 jobs
30 June: Shirtmaker TM Lewin closed all 66 of its outlets permanently, with the loss of about 600 jobs.

Monsoon Accessorize – 545 jobs
11 June: The fashion brands were bought out of administration by their founder, Peter Simon, in June, in a deal in which 35 stores closed permanently and 545 jobs were lost.

Mulberry – 470 jobs
8 June: The luxury fashion and accessories brand is to cut 25% of its global workforce and has started a consultation with the 470 staff at risk.

The Restaurant Group – 3,000 jobs
3 June: The owner of dining chains such as Wagamama and Frankie & Benny’s has closed most branches of Chiquito and all 11 of its Food & Fuel pubs, with another 120 restaurants to close permanently. Total job losses could reach 3,000.

Clarks – 900 jobs
21 May: Clarks plans to cut 900 office jobs worldwide as it grapples with the growth of online shoe shopping as well as the pandemic.

Oasis and Warehouse – 1,800 jobs
30 April: The fashion brands were bought out of administration by the restructuring firm Hilco in April, with all of their stores permanently closed and 1,800 jobs lost.

Cath Kidston – 900 jobs
21 April: More than 900 jobs were cut immediately at the retro retail label Cath Kidston after the company said it was permanently closing all 60 of its UK stores.

Debenhams – 4,000 jobs
9 April: At least 4,000 jobs will be lost at Debenhams in its head office and closed stores after its collapse into administration in April, for the second time in a year.

Laura Ashley – 2,700 jobs
17 March: Laura Ashley collapsed into administration, with 2,700 job losses, and said rescue talks had been thwarted by the pandemic.

It said failure to take such steps would result in 2.2m job losses this winter, with most redundancies falling in the accommodation and food sector, whereas many as 360,000 jobs could miss out on support.

Experts have said the JSS offers little incentive to companies to retain workers, because of how much they have to contribute to obtain government funding. In most cases, the NEF said, it would be cheaper for an employer to make one worker redundant while keeping a second on 100% of their hours, rather than keeping both on 50% and using the scheme to top up their wages.

Frances O’Grady, the general secretary of the TUC, who worked with the Treasury to develop the job support scheme and joined Sunak on the steps of Downing Street to launch it, said urgent changes to the scheme were needed as the Covid emergency had worsened.

Responding to the NEF research, she said: “With restrictions tightening, it’s clear that we need a more generous short-time working scheme for businesses hit by reduced demand. Reducing employer contributions could help save many more jobs. Ministers must act on this now and increase support for workers in businesses forced to close, and for the self-employed.”

Sunak, faced with mounting pressure to raise the level of job support as the government imposed tough local lockdown restrictions across the north of England, announced an expansion in the JSS earlier this month to protect workers at companies forced to close by the new controls.

The expansion of the JSS involves the government paying two-thirds of workers’ pay and removes the requirement for company contributions – in effect a new furlough scheme from November for firms in tier 3 areas.

However, the NEF said businesses facing tier 2 controls would also have reduced demand for their goods and services, and that high levels of employer contributions to use the JSS would trigger a surge in unemployment. It said cutting the level of employer contribution would require the Treasury to contribute more, but that would be cheaper for the public purse than allowing millions of people to fall out of work.

The research showed the cost to government of making up the difference to ensure employee wages were protected at 77% would, on average, be just £200 a month for each worker – significantly less than the costs of unemployment benefit, which started at £410 a month for a single adult before support for housing costs.

Alex Chapman, senior researcher at the NEF, said: “The present scheme was designed for a period of recovery, not a second wave, and it will not meet the chancellor’s stated aim of protecting ‘viable’ jobs. The good news is that there is a simple fix.”