Accountancy help as the furloughing scheme draws to a close

Angela Ashworth
Director | Purple Lime Accountancy
18th August 2020
Member roleChamber member

September will see a turning point for many businesses with staff as the furloughing scheme draws ever closer to its end (also known as the Coronavirus Job Retention Scheme).

Chancellor Rishi Sunak has warned there maybe hardship ahead for many people as the scheme winds down over the coming weeks. Subject to the Covid infection rate and lockdown, the scheme will end fully on October 31. Those companies which take back furloughed staff can also get a £1,000 bonus for keeping on each staff member.

The bonus will only be paid out from February 2021 and only if the workers returning from furlough are kept in their job until January 2021. It’s clear however that this incentive will not be enough for some business owners – and preparing for that is going to be critical both financially and morally as the weeks pass.

According to Personneltoday.com, 2 in 5 (40%) of organisations with staff on furlough say they will have to make some or all their furlough staff redundant when the scheme ends as the £1,000 will not be enough to save all of their jobs.

With this in mind, the big question is are you and your management team prepared for the end of furlough? Here are five key areas you need to consider:

Do you understand what the furloughing milestones are up to October 31?

From August 1st, employers have had to pick up the cost of National Insurance and pension contributions for their employees.

From September 1st, the government’s wage subsidy will drop from 80 per cent to 70%, up to a maximum of £2,190 per month, and on 1st October, it will reduce even more to 60%, up to a maximum of £1,875 per month.

Employers will also be required to top up wages to 80% or higher if they have previously agreed more generous top ups. From November 1, the government subsidy will stop.

What are your plans to deal with that? Have you looked at your cashflow? Have you worked with your accountant to manage that transition? Are you considering redundancies? Are you in a strong position and ready to forge ahead?

At the centre of all of this will be financial intelligence – do you have someone with an impartial and proactive attitude who can help you assess your business’s position and help you move forward? Or work with your team to realise your ‘new’ normal? Who will help you balance your financial survival alongside your business ethics?

Have you considered the best way to end furlough for your business?

Employers should regularly review furlough agreements to see if staff can be put on flexible furlough or return to work full time. At Purple Lime, we can support you with this and start to plan your next steps with compassion and precision in an environment which could change again at a moment’s notice. A stepped approach may be better than waiting until the last minute.

Planning ahead will help you decide the following:

  • Which job roles and skills are needed in the workplace
  • If all furloughed staff are needed back at the same time
  • If any staff might be kept on furlough because they're temporarily unable to work, for example if they’re caring for someone or are shielding

To end furlough, staff should receive notice in writing, but this is not a legal requirement. Also you need to consider what to do if they don’t want to come back?

Are you considering redundancies?

It is always worth considering if there are other options before resorting to redundancy – and we can help with that difficult balance. Remember this is a tricky time in business when how you behave can affect your reputation, regardless of legal terms and conditions.

The situation we are in is unique, so employees may be affected in different ways, and therefore they may be willing to work differently.

Employees on furlough can be made redundant, but the redundancy process needs to be planned carefully, otherwise they can claim unfair dismissal and all that goes with it including negative publicity. As an employer are you able to help your former employees to find new roles?

There are more risks around redundancies now than in any other situation we have known. People who may not be able to come back to work due to childcare issues, or they are shielding – how will it look if you make those people redundant?

Please also bear in mind that the furlough grant cannot be used for redundancy payments.

What does your back to work policy look like?

The CIPD.co.uk suggest there are three key tests before bringing people back to the workplace. These consider both the mental and physical health of your team.

Is it essential? If they can continue to work from home, or if not, is their work essential, or could they continue on furlough? This gives time for safety measures and employee guidance and consultation to be put in place.

Is it sufficiently safe? Employers have a duty of care for the health and safety of their employees therefore they need to identify and manage risks within the working environment.

Is it mutually agreed? It is vital to have a clear dialogue with your team to reassure them about returning to the workplace.

Is your workplace COVID safe?

This means following guidance relating to the Covid-secure guidelines and also looking at the sector specific guidance.

Following that guidance, ensure social distancing is possible in the workplace, there are plenty of opportunities to sanitise hands and wash hands – and where needed – face coverings are provided.

Help with all of these aspects above, including letter templates, policies and FAQs for both employees and employers. are available at: www.Acas.org.uk

And finally… what if your business is booming?

For some business owners and teams, this has been a busy time, they have adapted successfully, or their product or service is in high demand.

This business may have a few staff on furlough or none – however planning your financial future, goals and cashflow are still important.

Is this the time to invest more to increase market share?

Is this the time to invest in new technology to make the business more efficient?

Is this the time to invest in more people to ensure that unexpected success is embedded in the future of your business?

Whatever your business future is post-furlough – we can help you get there, for more help contact us at www.purplelime.uk.com

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