Unless something changes dramatically in the next few weeks, the furlough scheme is set to come to an end on the 30th of September.
Originally introduced in March 2020, the Coronavirus Business Retention Scheme was one of the first support schemes for businesses struggling due to the coronavirus pandemic.
The furlough scheme was originally due to last for just three months but was extended numerous times – and for the last 18 months, it has been a lifeline for companies facing financial difficulty.
So, with the scheme winding down and furlough ending, how can you prepare accordingly? And what happens if you still need help? Read on to find out...
Furlough scheme facts and figures
Since the start of the furlough scheme, a total of 11.6 million jobs have been put on furlough, with travel, hospitality, and entertainment industries unsurprisingly the sectors with the highest rates of furlough.
According to the latest facts, as of 30th June 2021, there were 540,000 employers with 1.9 million staff on furlough, which is down from the 31st of May, when 2.4 million staff were furloughed.
How much has the government been paying?
The government has been slowly reducing the amount they have been paying towards furloughed employees’ wages as the scheme has been winding down.
At the start of the pandemic, they were paying 80% of wages up to a maximum cap of £2,500 per month with employers choosing whether they wanted to top up pay packets by an additional 20%.
However, from 1st July, the government paid 70% of wages up to a maximum of £2,187.50 with employees topping up 10% to make up 80% of wages, and from 1st August, this was reduced again with the government paying 60% of wages up to £1,875.
Key dates to remember
As the scheme ends, there are some important dates to remember in order to claim your furlough payments for August and September.
Claims for furlough days in August must be made by 14th September 2021, whereas claims for furlough days in September must be made by 14th October 2021, with any amendments made by 28th October 2021.
What to do next
So, with furlough ending, what are your options? Well, with restrictions ending, your main options are to either bring your employees back to work on the same or different terms – such as reduced hours or redeployments – or let them go.
Key pointers to help your decisions should include which specific roles and skills are needed in the workplace and whether all your furloughed staff will be needed back at the same time.
Once you have decided who you need to come back and when, it’s essential that you give your staff as much notice as possible.
Here are 4 ways to prepare for the end of the furlough scheme:
1. Check your financial fitness
When your staff come back from furlough, they will need to be paid in full for the time that they work – so it is highly likely that you will need to cut costs as much as possible.
Start off by making sure you have a clear picture of your current financial situation so that you can put a plan together.
Review your accounts, audit your stock, and carefully review balance sheets for any efficiencies that could be made. It’s also worth speaking to your suppliers to see if you can get a better price.
2. Be thorough with your forecasting
Once you’ve got a good grip on your finances, you need to create a cash flow forecast. Prevention is better than cure – and there’s no better way to solve a cash flow problem than to prevent a shortfall in the first place.
By creating a cash flow forecast, you can estimate the amount of money you expect to flow in and out of your business and when, so you can know in advance how much cash your business will need in the coming months.
Planning ahead now means you can start making the necessary precautions to make sure you're prepared for any tough times ahead.
3. Control your cash flow
As you adjust to the end of furlough, it’s more important than ever to be stringent with your cash flow.
Set up a daily cash flow control to keep track of every single expense going in and out of the company. Make sure all purchases are approved by you, and that you carefully review expense claims of those coming back into the office.
By keeping a close eye on day-to-day cash flow, you will be able to stay in control of your company finances as you navigate the ‘new normal.’
4. Make redundancies where necessary
Of course, if you can’t afford to bring your staff back from furlough, redundancy is another option.
For there to be a genuine redundancy, however, employers must show that there is no longer a requirement for an employee’s job – and if your employees have been employed for more than two years, you need to pay redundancy.
If you can’t do so, your company is, in effect, insolvent – and you should speak to an insolvency practitioner as soon as possible in order to determine your next steps and ensure you fulfil your responsibilities as a director.
A company voluntary arrangement, for example, is a powerful tool that could allow you to resolve your business debt whilst continuing to trade.
Need additional expert advice?
If you are currently facing financial difficulty or are unsure of how you will navigate the end of the furlough scheme, McAlister & Co can provide free help and advice. Our friendly and approachable team are experts in insolvency and turnaround solutions for business and individuals.
So, if you need clear, strategic advice about furlough ending and the options available, contact us today.
