Furlough Scheme Extension Too Late to Save Jobs – Business Needs a Consistent Winter Plan

The extension of the furlough scheme may be too late to save jobs, said leading tax and advisory firm, Blick Rothenberg.

Heather Self, the tax partner at Blick Rothenberg, said: ‘Employers are supposed to agree on any changes to employees’ contracts in advance – how are they supposed to do that at six hours’ notice at a weekend? While it is welcome news that additional support is being offered to businesses during the new lockdown restrictions, the change may well come too late to save jobs.’

‘The Chancellor repeatedly said that the furlough scheme would not be extended, but has now done a last-minute U-turn and has postponed the Job Support Scheme for at least a month. The extension is more generous, but the very short notice is a Halloween nightmare for employers and jobs that could have been saved may now be lost.’

Businesses need to be able to plan ahead through the winter and into 2021. We urge the Chancellor to set out a plan to support businesses in the months ahead, rather than reacting on a week by week basis to changing circumstances.’

She added: ‘Employees will receive 80% of their wages from the Government for any hours not worked, with their employer being responsible for national insurance and pension contributions – a cost of around 5% for an employee on average earnings.

‘This is more generous than the Job Support Scheme, which only offered a minimum of 67% for closed businesses and 73% for businesses where an employee worked at least 20% of their usual hours. It is also better than the last two months of the furlough scheme, where employers had to make an additional contribution of 10% or 20% of pay.’

‘The furlough extension takes us back to the rules which applied in August, with one important change: the extension is open to any employee who was on the payroll, and for whom a PAYE return had been made, by 30 October. This means that employees who joined after 19th March, and employers who had not previously used the furlough scheme, will be able to make a claim for November.’

The Job Support Scheme will come back into play once the extension ends, probably in December. David Hough a partner said: ‘Businesses need to know now what support will be available to them through the winter and not just up until December Some will have spent significant sums readying themselves to trade through the winter, “non-essential” retailers who had invested in inventory for Christmas, have no idea what support will be provided to them for the timeframe that they are closed.’

He added: ‘This is crucial because, in order for businesses to continue to protect jobs, considering that the furlough scheme still requires contributions to national insurance and pension, they need to be able to accurately forecast their cash burn and their working capital needs when they are able to reopen.’

‘The reintroduction of the furlough scheme is a clear sign that the Government sees this as the appropriate jobs support mechanism during the lockdown and therefore they should announce now that the scheme will be in place throughout the winter as the threat of further closures of shops, restaurants, gyms etc must be a real one.’

This might save thousands of redundancies and help prevent an economic crash in the New Year.

David said: ‘The application period for Government support loans, such as CBILS, is due to expire at the end of November. It was previously announced that a new scheme would be in place from January, but we don’t know what that it is. Businesses now facing difficulty have no idea whether they should apply for CBILS or wait for the terms of the new scheme.’

‘The Chancellor should announce the details of the new scheme and confirm its availability until at least the middle of 2021, allowing for a difficult winter and working capital challenges faced by businesses in the months after they are able to reopen.’