Statutory retention pay would let workers go on paid leave with the state paying at least two-thirds of their wages, the Resolution Foundation said.
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An additional £22 billion support package should be made available to keep people in their jobs and support families facing income shocks as coronavirus spreads, according to a think-tank.
A statutory retention pay scheme is needed to support struggling firms and help to prevent mass job losses, the Resolution Foundation argued.
The scheme could be modelled on maternity pay and help avoid the need for mass redundancies, enabling firms to pick up activity quickly when shutdown restrictions have eased, it said.
People who did not have work temporarily would remain formally employed by their firm, but with a significant amount of their pay covered by the state.
Firms would continue to pay workers at least two-thirds of their previous wages via their payroll, with the state providing a rebate for those payments, the think-tank suggested.
People working in sectors critically affected by coronavirus, such as non-food retail, hotels and restaurants, airlines, travel operators, cleaners and personal services, account for around a fifth of the workforce, the Resolution Foundation said.
But working from home is less viable in many of these jobs compared with higher-paid, white-collar jobs.
The Foundation, whose work is focused on improving the living standards of people on low to middle incomes, said wider support is also needed to limit the hit to families’ living standards.
Unemployment support should be increased alongside an extension of statutory sick pay, it said.
The Foundation’s report estimates that its suggested combined package of a new statutory retention pay scheme, increased unemployed support, wider uprating of benefits and extending statutory sick pay could cost around £22 billion.
Chief executive Torsten Bell said: “In order to avoid mass redundancies in affected sectors, new statutory retention pay would allow firms to put workers on paid leave with the state paying them at least two-thirds of their wages during the shutdown. This will ensure they can pick things up quickly when conditions improve.
“But the scale of the economic shock facing the country means that many families are going to rely on our social security safety net over the coming months – a safety net that has shrunk considerably over the past decade. To address this, the Government should increase unemployment support by a third to £100 a week.
“This approach would show the Government is committed to doing whatever it takes to support family budgets, and cushion the living standards hit from the wider economic shock.”