How will I pay my staff as soon as the furlough finishes?
How will I pay my staff as soon as the furlough finishes? The introduction of the Coronavirus pandemic in February 2020 prompted Rishi Sunank, Chancellor of the Exchequer, with the UK government, to introduce many support packages to aid UK businesses impacted by COVID-19.
As part of the aid provided, job retention was top of the list of the government. Consequently, the UK government introduced the Coronavirus Job Retention Scheme (CJRS). Over 60% of businesses opted to use the aid to secure their business since it was introduced in March 2020.
The scheme, planned to cease in September 2021, has enabled businesses that have directly experienced a drop in trade to furlough employees to be affected.
The deals are:
- UK’s government covers 80% of employee wages capped at £2,500 per month.
- The balance of 20% can be paid by employers, though not obligatory;
- Commencing July 2021, employers must pay 10% of those on furlough, increasing to 20% in August 2021.
How will I pay my staff as soon as the furlough finishes? What can I do?
Paying your employees on time is essential to the smooth operation of a company; if a company cannot do this, this emphasises your company may be suffering financially and perhaps insolvent. However, options exist other than closure.
With businesses forced closing for months on end, the scale of interruption is enormous. Many companies will have run out of cash and floundering with impossible company cash flow problems
How will I pay my staff as soon as the furlough finishes? Consider commercial funding to improve cash flow.
If convinced your business will bounce back once June 21st 2021 happens, you might contemplate short-term funding to bolster cash flow while your revenue for your business builds back up.
However, this requires repaying; therefore, it is essential to understand the viability of your business.
How will I pay my staff as soon as the furlough finishes? After furlough. Can I make staff redundant?
Business in the UK has been affected by how we go about working directly due to the pandemic. Individual protection through social distancing means the leisure and travel industry has been affected, reducing numbers of people able to attend. Therefore, customer levels have declined, impacting cash flow and numbers of people required to then carry out their jobs.
Suppose you are then considering making redundancies after the furlough scheme ends. Therefore, ensure you follow UK government guidelines to protect yourself from unfair dismissal claims. Selecting your staff members for redundancy is demanding anytime, but you must practice a fair practice as an employer.
Directors should have an understanding of employee rights when a company is insolvent.
Grasping Holiday pay and the furlough scheme?
Employees furloughed continue to however, accrue statutory holiday entitlements throughout this time. Therefore, if an employee was put on furlough at the scheme’s start in April 2020, a year later will accrue annual leave. However, issues may arise for business managers as employees seek to take holidays and how it will impact financially on businesses already battered due to the pandemic.
Suppose employees opted not to use their holiday entitlement during the furlough period. Therefore, they return to work with an increased annual leave to take over the next two years. Consequently, losing staff can affect your business, especially working to recover from the pandemic. Employers can restrict employees’ annual leave, so long as there is a valid business reason. The new regulation now means yearly holiday can be rolled over into the following two leave years, allowing businesses to manage their business effectively.
However, if not affected, your business may require accounting for paid annual leave. If concerned? Please contact HBG Advisory for robust advice on 0800 612 5448.
Holiday pay after furlough also affects redundancy.
Employees made redundant remain entitled to receive any outstanding holiday pay, and usually paid as a lump sum in the final salary of the redundant employee. The additional holiday entitlement accrued during the furlough period needs financial consideration when making any staff redundant.
I’m concerned that my company cannot continue once the furlough scheme ceases.
The UK furlough scheme planned to end in September 2021. However, the scheme will reduce beginning July 2021. Therefore, how will business react when aid ceases, and companies are liable for their total operating costs?
As of June 13th 2021, current events suggest the June 21st 2021 deadline may not happen, as new variants of the COVID-19 impact the UK.
Therefore, seek help now and avoid issues in the future from HBG Advisory.
The team at HBG Advisory provide robust, experienced support exploring with you in clear English the options available to you as a director to support your limited company.
If the directors can avoid closure and your company is viable moving forward, then two forms of restructuring avail with the protection of a licensed insolvency practitioner, as found in HBG Advisory.
However, if we fail to achieve any of the above, the company’s cash flow can’t service financial creditor pressure. Therefore, the option of a voluntary insolvency process exists for the company directors to consider a: