Paying Staff As Furlough Ends

Paying staff as furlough ends. Author: John A Waller, Director. Reviewed June 10th, 2024.

How will I pay my staff now furlough has finished? The Coronavirus pandemic in February 2020 prompted Rishi Sunank, the then, Chancellor of the Exchequer, with the UK government, to introduce support packages to aid UK businesses impacted by COVID-19 pandemic.

As part of the aid provided, job retention was top of the list of 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, which ended in September 2021, let businesses furlough employees when trade was low. 

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.
  • Since July 2021, employers must pay 10% of those on furlough, increasing to 20% in August 2021.

Paying Staff As Furlough Ends, What are my options?

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 to close 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 

The end of Covid-19insolvency protection has now affected the viability of UK companies as the pandemic eases.

How will I pay my staff as soon as the furlough ends? Consider commercial funding to improve cash flow.

If convinced your business will bounce back since 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 work directly due to the pandemic. Individual protection through social dissociation means that the leisure and travel industry has been affected, reducing the number of people who can participate. Therefore, customer levels have declined, impacting cash flow and the number of people required to carry out their jobs.

Suppose you consider 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 however, should have an understanding of employee rights when a company is insolvent.

Grasping Holiday pay and the furlough scheme?

Employees furloughed continue to accrue statutory holiday entitlements throughout this time. Therefore, if an employee was put on furlough at the scheme’s started 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 financially impact 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 therefore means yearly holidays can be rolled over into the following two leave years, allowing businesses to manage their business effectively.

However, your business may require accounting for paid annual leave if not affected. If concerned? Please contact HBG Advisory for robust advice on 0330 056 3120.

Holiday pay after furlough affects redundancy.

Employees made redundant however 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 ended September 2021. 

Therefore, consult HBG Advisory to avoid future issues. 

The HBG Advisory team provides professional support to limited company directors exploring their options in clear English.

If the company is viable, then two forms of restructuring are available with the protection of a licensed insolvency practitioner.

However, the company’s cash flow can’t service financial creditor pressure if we fail to achieve the above. Therefore, the company directors can choose a:

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