Ending furlough could spell financial disaster for younger workers

New research has found that the ending of the furlough scheme could spell financial disaster for younger workers.

From 1st July 2021, the Government will reduce the level of support given to employers under the Coronavirus Job Retention Scheme. Currently, the Government pays 80% of an employee’s wages for any hours not worked. From Thursday, this will reduce to 70%, with the employer needing to pay the extra 10% up to a maximum of £2,500 per month, plus National Insurance and pension contributions. The level is set to reduce again from 1st August to 60% Government support, 20% from employers and the scheme is due to finish at the end of September.

Commenting on the changes, Anthony Morrow, Co-Founder OpenMoney which enabled the research, said “While parts of the economy are recovering well from the effects of the pandemic, other sectors are still getting back to normal, and some are yet to fully reopen. According to the Office for National Statistics, 1.5 million people were still on furlough at the start of June 2021 and a third (35%) of businesses temporarily closed or paused trading have low confidence of surviving the next three months. Finding more money to cover a portion of wages for those on furlough may be the final nail in the coffin for businesses that are already struggling with cash flow.”

“For employees on furlough, these changes and the looming closure of the Coronavirus Job Retention Scheme will raise concerns over their future job prospects and the long-term impact of the pandemic on their finances. The end of the furlough scheme could spell financial disaster for many younger workers, in particular, who have been disproportionately impacted by the coronavirus crisis and are now facing further uncertainty from an already vulnerable financial position. Our recent advice gap research among over 2000 people found that in the last year, nearly half (44%) 18- to 34-year-olds have run out of money before they get paid (a third (32%) had used short-term credit to pay for something because they didn’t have enough money at the time and a third (34%) had borrowed money from friends and family to cover day-to-day expenses.

“If you are worried about your finances, now is the time to review your spending to make sure you know where your money is going; even small savings can make a big difference over time. If you don’t have any emergency savings or have had to dip into them over the last few months, try to build up a cash fund to cover at least three months’ essential expenses – like mortgage and rent, bills and groceries. OpenMoney offers free, impartial advice which can help you manage your money better and make sure things don’t get any worse. Help is out there if you need it.”