Image via PxFuel

Is furlough worse for high earners?

The government's salary replacement scheme is capped at £2,500 a month, far less than some people earn.

When the UK government told most businesses to close and most people to work from home in an attempt to combat coronavirus, it knew that the result would be lots of people losing their jobs. Closed businesses aren't making any money with which to pay workers, and not everyone has the type of job that can be done from home. To mitigate the suffering, the government told companies that instead of laying off staff they should furlough them (keep them on retainer so they can come back when the lockdown ends).

To make this option financially viable, the government also said it would pay 80 percent of the salary of furloughed workers, but only up to £2,500 a month, which is the equivalent of a £30k p/a salary. That's about the UK average - meaning there are plenty of employees who earn more than this. If these workers are furloughed and their employer refuses to make up the difference, the result can be a significant pay cut.

Not everyone will feel much sympathy for people who in regular times pulled in thousands and thousands of pounds more than folk at the bottom of the pay scale. But some of these furloughed high earners think they've got a rawer deal than most because their bills have remained higher than average while their income has been decimated. Higher earners are more likely to have big outgoings like expensive accommodation and private school fees (some of which are still charging for tuition despite being shut). Not all of them have savings. Some have seen their salary drop below their rent.

So it is true that some might be having severe financial difficulties right now. However, higher earners also often have access to advantages that lower-paid people do not. For one, they're more likely to be homeowners. Unlike landlords, banks are offering mortgage holidays, where you defer your payments for a bit. Mortgage holidays have been criticized for actually increasing people's debt (because interest keeps being added while you're not paying) but that will be less problematic for people who can expect to be earning high salaries again in a few months.

Higher income workers are also more likely to have the sort of white-collar jobs that can be done from home and to own the equipment that makes working from home easier, like fast broadband and a good laptop. Plus, many will have well-off family members, savings or other assets (things of value) which can be drawn upon in tough times.

Read our explainer on: what does money do?

Recent articles

Reader Comments