How to plan your exit from the Furlough Scheme

The Coronavirus Job Retention Scheme (CJRS), commonly referred to as the Furlough Scheme enters its final quarter and will close 30th September 2021.

The furlough scheme, where the government pays the majority of the wages of employees who cannot work, or whose employers cannot afford to pay them, ensures 80% of the wages for hours not worked, up to a maximum of £2,500 per month, are paid.

In this article, we take a look at what your options are over the coming months to help you plan ahead and what you can do to help mitigate any effects.

Changes to the Furlough Scheme before September 2021

Employers are being asked to make a bigger contribution during the final months of the Furlough Scheme.

• From 1st July 2021, the government will pay 70% of a worker’s salary, and employers will pay 10%, leaving employees with 80% of their previous salaries, up to the same monthly limit as before – £2,500.
• During August and September, the government will pay 60% and employers 20%, up to the same £2,500 limit.

Employers still have to pay pension and National Insurance contributions for their workers.

Lifting lockdown on 19th July 2021

Over the coming months it will become more expensive to furlough workers which the government hopes will encourage employers to take workers back full-time if they can.

As the economy opens up, and the restrictions end (currently stated as 19th July 2021) the government hopes that most furloughed workers will be able to return to work as businesses fully reopen.

The cost of Furlough to the economy

The current estimates from the Office for Budget Responsibility for the cost of the Furlough Scheme are approximately £66bn (March 2020 to September 2021).

At the start of the pandemic, it was feared that 10% of workers would become unemployed. The current rate is less than 5% however proving the scheme has undoubtedly saved millions of jobs.

Furlough Scheme statistics:

• Just over one-third of employers (35%) were using the furlough scheme at the end of April.
• 11.5m jobs have been supported by the Furlough Scheme since March 2020.
• Approximately 3.4m were on furlough (down from a peak of 5.1m in January).

Will the Furlough Scheme be extended?

Furlough has been extended many times already, causing much confusion. The current extension beyond the current 19th July 2021 date, allows some flexibility to prevent further extensions.

Boris Johnson has stated that this should help give businesses some certainty as they do not wish to extend the Furlough Scheme further.

If the data changes however and a large new wave of infections leads to another lockdown, the government will come under a lot of pressure to reconsider.

COVID-19 and disruption to your business

The government support, by way of the Furlough Scheme, may have helped you retain your employees throughout the COVID disruption but will you be able to continue beyond September without the same level of support?

Depending on your industry, the disruption will have been greater for some and the end of the Furlough Scheme may mean you are unable to retain your current employees beyond that point.

Planning for employee retention

You may need to carefully consider your staff costs and decide if you can continue to operate without shedding staff, beyond 30th September 2021.

Business may be starting to pick up, but careful planning is required to review your sales forecasts and what staffing levels are required to meet those forecasts, to ensure your business is operating effectively.

The impact of the pandemic will go on for much longer than the current government support schemes and it is vital you plan ahead to project your sales vs overheads to avoid making the wrong decisions.

You may have taken advantage of loans to help your business survive the pandemic and repayments will need to be factored into your costs.

How we can help

We can help you identify areas that will need to be planned for and prepare a business forecast for the next 12 months.

This will help mitigate business risk and enable you to consider which options are best for your business as we try to move forward to some kind of normality.

Making informed decisions will be your best tactic towards surviving the coming year and minimising any reduction in your present workforce.