The furlough scheme has been hailed as a saviour for businesses – saving the jobs of more than 9million people at the peak of the pandemic.
Figures from July show that 1.9million people remain on furlough but as the economy has continued to open, it is expected that the figure is lower now at between 1.1 – 1.6million.
The scheme was launched in spring 2020 and ends on September 30.
Who is still on furlough?
Though Covid-19 social distancing restrictions were lifted on July 19, there is still some caution about big events, highlighted particularly after the Covid-19 spike in Cornwall after the 50,000 crowd gathered for the Boardmasters festival.
And there is still a lack of demand in the travel industry which faces continued disruption in overseas travel due to quarantine and testing measures.
And while staffing shortages have hit the leisure and tourism industry, businesses may not yet have been operating at full capacity.
Steve Ashworth, tax and finance expert at PKF Francis Clark said: “The question is now whether those businesses will have enough business to afford those wage bills or even whether their businesses are still relevant in a world that has shifted during the pandemic.”
What happens to workers on furlough on September 30?
There is no legal requirement for employers to give notice to furloughed workers being called back to work but they should get in touch to let staff know when they should return and what safety measures are in place.
If employers are looking at making staff redundant, that process should have already started in cases of more than 20 staff at risk of losing their jobs.
Citizens Advice sets out advice on redundancy on its website.
If 100 or more people are being made redundant, group meetings must start at least 45 days before anyone’s job ends.
For 20 or more staff at risk of redundancy, the group consultation must start at least 30 days before anyone’s job ends.
Redundancy pay is based on earnings before tax (gross pay).
For each full year worked:
- up to age 22 – half a week’s pay
- age 22 to 40 – 1 week’s pay
- age 41 and older – 1.5 weeks’ pay
There is a redundancy pay calculator on GOV.UK
Will there be a cliff-edge of redundancies?
Experts are predicting that there will be an increase in the number of staff made redundant at the end of furlough but the number may not be as high as first thought.
At the start of the pandemic it was feared that more than one in 10 workers would become unemployed, instead the unemployment rate is currently less than one in 20.
Mr Ashworth said: “I’m not certain we are going that the ‘cliff-edge’ of job losses is going to happen as first predicted. However, I think that the next six months will be crucial. Some businesses will get through Christmas but the winter will be the killer for many businesses.”
According to the latest ONS figures, job vacancies are at a record high – In May to July 2021, there were an estimated 953,000 job vacancies – having grown by 43.8% (290,000) compared with the previous quarter.
The squeeze has been brought about by the pandemic and Brexit which has seen an exodus of EU workers leaving industries like haulage and hospitality struggling to recruit.
But the number of jobs available is good news for jobseekers even if they might not be in jobs they at first considered.
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What challenges will businesses face?
Businesses that have taken Government-backed loans will be facing repayments alongside an increase in VAT from September 30 for leisure and hospitality businesses. It increases from 5% to the transitional rate of 12.5% before returning to 20% in April 2022.
Philip Winterborne, chairman of insolvency and restructuring trade body R3 in South West and a partner at Temple Bright Solicitors in Bristol, is calling on the region’s company directors to use September to review their businesses and seek advice about the options open to them to address any impending financial issues they may be facing.
He said: “It’s very hard to admit your business is struggling. But starting the conversation as early as possible will mean you have more potential solutions open to you, and more time to make a decision about how you move forward.
“The most critical thing South West company directors need to be aware of are signs their business is in distress, including problems paying wages, issues paying suppliers on time, or other problems with cash flow and not to ignore them if they present themselves.”
Businesses are also being urged to make sure their furlough claims are accurate. HMRC are doing spot checks.
Back in September, HMRC announced that up to 10% of furlough monies had been wrongly paid to claimants. Due to the frequent changes to the guidance published and changes to the amounts employers could claim under the scheme, the HMRC believes there is a significant chance that businesses have unwittingly made mistakes which could lead to significant fines later down the line.
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