Discount retailer Primark has become the first big UK employer to turn down a multimillion-pound bonus the government is offering for returning furloughed staff to work, saying the sweetener “should not be necessary”.
The decision by the company, which is part of London-listed Associated British Foods, will intensify the scrutiny on how the rest of corporate Britain responds to a scheme laid out by chancellor Rishi Sunak last week.
Under the scheme, companies will receive £1,000 for each furloughed worker they bring back — as long as they are still employed by the end of January. The plan is part of a wider push to reboot the economy that the government announced last week.
However, the scheme has drawn some criticism for not distinguishing between companies that have the resources to bring back employees — and planned to anyway — and those that do not.
In a statement Primark, which furloughed about 30,000 staff as the government shut non-essential retailers during the lockdown, said it “should not be necessary” to apply for the bonus which would have amounted to about £30m for the retailer. Its decision was first reported by the Sunday Times.
Department store chain John Lewis, which is owned by its employees, is unlikely to take part in the bonus scheme, according to a person familiar with the matter, who cautioned that a formal decision had not been made. Having furloughed 14,000 staff in April, John Lewis said last week it would not reopen 8 of its 50 stores, putting 1,300 jobs at risk.
Paul Johnson, director of the Institute for Fiscal Studies, pointed out last week “how hard it is to target resources only where they are really needed”, and said that many companies receiving the bonus would have rehired staff anyway. The furlough scheme, which has supported more than 7m jobs, will end in October.
Primark missed out on sales of roughly £650m for each month that its 375 shops were shut. The company reopened most of its stores in June. Companies can claim the bonus payments for staff who were brought back from furlough prior to the introduction of the scheme.
Next, the FTSE 100 fashion retailer, said it had not decided whether to make use of the scheme. Tata Steel, which runs Britain’s largest steelworks in Port Talbot, said in a statement to the Financial Times that it welcomed the government’s scheme and confirmed it would accept the payments.
Around one-third of Tata Steel’s 8,000 UK employees were furloughed at some stage during the pandemic.
Steel suppliers were hit by a slump in orders after car factories temporarily closed and building activity ground to a halt, leading a number of producers to request financial assistance from the government.
“Our use of the furlough scheme allowed us to retain vital skills and experience within the company to not just keep the business going in these difficult times, but to prepare to serve our customers as they ramp up their operations too,” Tata Steel said.