INTERVIEW Nic Redfern - KnowYourMoney.co.uk
“The viability of these options will very much depend on each business’ circumstances.”
Nic Redfern, Finance Director - KnowYourMoney.co.uk
The end of the furlough scheme
On 29th May, some ten weeks after he fi rst announced it, the Chancellor Rushi Sunak revealed that the
furlough scheme was going to be gradually tapered down then ended in the coming months. Nic Redfern,
Finance Director, KnowYourMoney.co.uk explains what businesses should be aware of as we approach the
scheme’s conclusion
Employers will be nervous
that this vital nancial
crutch is to be whittled
down and then removed
on 31 October. Indeed, it poses
some interesting questions
about how they can adapt to the
ending of the furlough scheme.
Changes to the furlough
scheme
Firstly, it is important that we
examine what changes are being
made to the CJRS, as outlined
by Mr Sunak at the end of May.
• 30 June: the CJRS will be
closed to new entrants
• 1 July: employers can bring
back furloughed sta on a
part-time basis
• 1 August: employers will
have to start paying national
insurance and pension
contributions for furloughed
sta
• From 1 September, while
employees on furlough will
continue to get 80% of
their salary, the proportion
that the state pays will be
reduced each month – the
government will only pay
70% in September and
60% in October, with the
employer having to make up
the di erence
• 31 October: the furlough
scheme ends
e Government’s tapering
down of the furlough scheme
is a means of protecting public
nances – there is, after all,
only so much support the state
can provide.
But the decision has also
likely been taken as a way of
spurring businesses back into
life; of encouraging them to
re-employ sta and nd ways of
adapting to the “new normal”
that await us in the second half
of 2020.
Preparing for the tapering
down of the furlough scheme
Many businesses are going
to need to prepare for these
changes. Indeed, as stated earlier,
the furlough scheme has been
widely used by the private sector,
with over 8 million employees
having the vast majority of
their salaries paid for by the
Government.
is comes at great expense
to the state, which is estimated
to have spent £15 billion thus
far supporting furloughed
employees. What’s more, by the
end of the scheme, the gure is
expected to reach £80 billion
– that is £10 billion for each
month the scheme was active.
Yet these approximated
gures show us that there
are billions of pounds still
yet to be paid for the initial
three months of the furlough
scheme. Indeed, this chimes
with the ndings of a recent
study KnowYourMoney.co.uk
conducted among over 900
UK businesses; we found that
as of April almost half (48%)
of British companies had
furloughed sta – this gure
will likely be even higher now
– but of those, 71% were still
awaiting funds to be transferred
to them from the Government.
Here is a simpli ed example
of how it might work: you have
a member of sta who earns
£2,000 per month and works
40 hours a week. is employee
has been furloughed and you
are not topping up their salary
beyond the 80% o ered by
the Government. In July, your
employee returns part-time
and works 20 hours per week
(half their normal amount) –
they will now receive 50% of
their monthly salary from you
(£1,000), while the remaining
50% will be eligible via the
furlough scheme (80% of it
– so £800). at means your
employee will now earn £1,800
per month, which is higher than
the amount they would be paid
if they were furloughed fulltime
(£1,600).
is approach presents
bene ts to the employer and
employees alike. While the
business can bolster their
workforce without bearing the
full brunt of employees’ salaries
again, the employee can resume
working in a gradual way and
earn more money.
Other fi nancial supports still
available
For those who are not in a
position to re-employ furloughed
sta and are worried about
having to do so come November,
they may need to nd alternative
forms of nancial support for
when the scheme ends.
For example, loans are
available through the
Coronavirus Business
Interruption Loan Scheme
(CBILS) and Bounce-
Back Loans initiatives. e
Government is also providing
a Small Business Grant Fund
(SBGF) to businesses that
already receive Small Business
Rates Relief (SBRR) or Rural
Rates Relief (RRR).
e viability of these options
will very much depend on each
business’ circumstances. But
importantly, if the tapering
down – and eventual ending
– of the furlough scheme is
causing nancial concerns
within your organisation,
remember that there are other
supports in place.
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