When furlough ends I can’t pay my staff.
When furlough ends, I can’t pay my staff. COVID-19 has affected my business. Please read ‘ UK companies affected by coronavirus COVID-19′.
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When furlough ends I can’t pay my staff. So how do I pay my staff?
In response to the Coronavirus COVID-19 pandemic, the UK government therefore introduced schemes to support UK businesses to survive the current pandemic. The Coronavirus Job Retention Scheme (CJRS), has been used since March 2020.
The scheme ends September 2021.
As part of the scheme, employers who drop has hit in trade due to coronavirus-related business interruption can furlough the staff for whom there is no adequate work. The UK government pays:-
- 80% of employees’ salary capped at £2,500 monthly;
- Employers may however elect to top this up to 100%;
- As of July, employers must contribute 10% of furloughed staff’s wages, and in August 2021, then raise to 20%.
I can’t afford to pay my employees – what options are available?
Ensuring staff paid on time is one of the essential elements of running a business; if a company cannot do this, this highlights potentially severe financial problems. However, if your business is or will struggle to pay your staff, then the team at HBG Advisory will explain the options available to you and your business.
With businesses facing closure as we come out of the pandemic. Many limited companies have run out of cash and are unable to commence trading. However, this will take time to build back up, as this will be predominantly reliant on sales – and therefore customers – returning.
For further detailed information reading on employees’ rights, please read:
When furlough ends, I can’t pay my staff. Help? Then consider commercial financing to increase cash flow.
If you are confident your business will bounce back, you may wish to consider short-term funding to enhance cash flow while your business revenue returns to pre-Covid levels. Therefore, elevating your business’s financial pressure allows you to pay staff while focusing on improving revenue to the company.
Of course, this money needs then paying back. Eventually, so it is crucial that you only go down this route if confident in your company’s long-term viability in the future.
Can I make staff redundant after furlough?
However, as the UK rolls out of lockdown in June 2021, nobody knows how the economy will move on? For some businesses, life after the Coronavirus may never be the same again. Social distancing impacts restaurants, pubs, and other venues. Therefore, a venue can only hold a significant reduction of the customers it previously accommodated. Consequently, the business has a reduced requirement for staff.
Suppose you are considering redundancies after the furlough scheme ends. Therefore, ensuring you adhere to UK government guidelines is essential for your business to avoid unfair dismissal claims. For further in-depth reading, please view’redundancy pay to be protected for workers on furlough‘.
Understanding the furlough scheme and holiday pay
Employees furloughed remain able to claim legal holiday entitlements. Therefore, employees furloughed at the start of the scheme in April 2020, a year later, it is plausible to believe that they could have built up a reasonable amount of annual leave. Therefore, possibly creating logistical and financial difficulties for employers when staff return to work.
Suppose employees have not opted to use any of their holiday entitlement during the furlough period. In that case, they will be returning to work with an excessive amount of annual leave owing, which requires spreading over the forthcoming years. Therefore, your business faces a shortage of team members when you need all your employees to aid in the recovery process. However, employers may restrict annual leave, provided a valid business reason exists.
The new regulation now means yearly leave can be rolled over into the following two years, aiding companies to manage their workforce efficiently while not heavily impacting its viability.
However, even if this does not pose practical problems to your business, you still have to allow for this paid annual leave, which you will have to give your employees. Moreover, if worried, you remain unable to afford staff holiday pay after furlough. Therefore, you should seek expert help and advice as soon as feasible.
Holiday pay after furlough also affects redundancy.
If an employee is made redundant, he is entitled to be paid for all holidays accrued but not yet taken; typically paid as a lump sum in the final payment of the redundant employee. Therefore, employers must account for any unpaid holiday entitlement over the furloughed period for the cost of staff redundancy.
I am concerned my company will not continue after the end of the furlough scheme.
Employers should be aware that the furlough scheme ceases in September 2021. However, decreasing government support will begin in July 2021 to iron out the schemes’ withdrawal. Once these costs return and financial aid lessened, some companies will find they cannot resume trading.
So if you have concerns moving forward once the furlough scheme ceases? Then have a chat with the team at HBG advisory in confidence.
HBG Advisory provides robust, experienced advice to company directors across the UK.
Consider reading ‘What is company insolvency in the UK‘ for further in-depth guidance.
The team at HBG Advisory can explore with you in plain, understandable English the options open to you. They include: