Germany style furlough: What is the German style furlough? | Personal Finance | Finance

Rishi Sunak was due to unveil his autumn budget this week but the announcement has been scrapped in favour of a Winter Economy Plan that was launched yesterday. Mr Sunak spent his time putting together a new package to support Brits unable to work following a second spike. One option was a German-style furlough or wage subsidy scheme that would be used to cut costs. But what is the Germany-style furlough?

Mr Sunak’s new plan is to have Brits work at least a third of their normal hours in order for the Government to pay a third of their total wages. 

The final third will come from the employers, and this is essential. 

This news comes as Boris Johnson employs stricter rules to combat a second-wave of the virus.

The UK has reported its highest amount of daily cases, with 6,208 people testing positive in just 24 hours on September 23.

Nicola Sturgeon has decided to ban the mixing of households indoors, and rumours that a second national lockdown are spreading.

READ MORE- Rishi Sunak announces new £5bn escape plan

The existing furlough scheme that has supported the UK’s workers through the pandemic so far has cost the Government more than £39 billion.

Mr Sunak stated that the furlough scheme needs to change because the Government cannot afford to continue paying 80 percent of out-of-work employee’s wages a month. 

In the last eight months, British companies have borrowed over £57 billion from the Government.

The Government’s new offer is capped at £697.92 per month, so workers who are currently working a third of their normal hours will get 77 percent of what they normally get. 

 

What is the German style furlough?

Germany’s furlough scheme is called Kurzabeit, which translates to ‘short work’.

It was believed that the Kurzarbeit system would be taken on in the UK.

At the start of lockdown, more than 10.1 million workers were on Kurzarbeit in Germany, but this nearly halved by late July.

Like the UK’s furlough scheme, Kurzarbeit aims to save jobs with employers reducing employees working hours instead of laying them off.

The Government pays those on the scheme about 60 percent of their regular income, and more for workers with children.

This is 60 percent of their pay or pay for the hours not worked while getting paid by the employer for the hours they have worked.

This rate rises to 70 percent after three months and 80 percent after six months.

Germany has been able to announce that it will extend its scheme until the end of 2021.

The scheme has cost the German Federal Employment Agency €12billion so far and is predicted to cost them €36billion with this extension.

This is due to cost £27 billion and will help the country’s economy to recover.

The UK Chancellor announced a similar plan yesterday, since both ensure companies pay staff for the time they are at work and the Goverment also pay a chunk.

However, the UK’s scheme expects employers to pay a little more. 

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