Is your business relying on the government furlough scheme?

July 3, 2020 / News & General

The coronavirus pandemic has put a huge strain on businesses and the UK economy as a whole. With many businesses forced to temporarily close due to lockdown and social distancing measures, and many struggling due to the economic climate, the government introduced the furlough scheme to help companies pay their employees and to ensure that workers were not left with no income.

The government furlough scheme, also known as the job retention scheme, sees employees paid 80% of their salary by the government, up to a maximum of £2,500 per month. Employers can choose to top up their employees salary with the extra 20% but are not required to. During this time, employees cannot work for their employer.

The furlough scheme has been incredibly popular with research revealing in May that around 1 in 4 workers were being paid by the government.

When will the furlough scheme come to an end?

Initially the furlough scheme was due to end on the 31st May but it was announced by Chancellor Rishi Sunak that this deadline was being extended until the end of October.

The Treasury issued a statement on the 17th April about the future of the furlough scheme, saying: 

“Future decisions on the scheme will take into account further developments on the wider measures to reduce the spread of coronavirus, as well as the responsible management of the public finances.”

What happens to employees after the scheme ends?

Both businesses and employees alike will no doubt be thinking about what will happen once the scheme comes to an end.

There are a range of options that businesses may consider:

Bring back employees full-time

If companies are able to then the most straightforward and beneficial step to take would be to bring back all their employees back full-time on their regular wage or salary. However, not all companies will be able to do this.

Bring back employees on reduced hours

Some companies may be able to work out a situation with their employees where they come back off furlough in a reduced capacity such as part-time. 

Make redundancies 

Unfortunately, companies may need to make some employees redundant after the furlough scheme has ended.

Business insolvency

Many companies may not be able to survive once the furlough scheme ends, either because they’re unable to reopen and trade again due to existing safety issues relating to social distancing, or because the damage has already been done and they are unable to continue. This could result in a wave of insolvencies.

If your company is in debt and cannot continue to trade, your best option could be a Creditors’ Voluntary Liquidation (CVL) which acknowledges your duties as a director. If you’re a business owner worried about your company is going to survive once the government furlough scheme has ended please contact us at Clarke Bell. 

As Licensed Insolvency Practitioners we can offer you free, initial advice on the best next steps you can take for you and your business: 0161 907 4044 /