The Government’s Job Retention Scheme (JRS) will allow firms to claim a grant for up to 80% of salary of furloughed workers up to a maximum of £2,500 per month (plus associated NI and statutory minimum auto-enrolment pension costs) for up to three months. The scheme is backdated to 1 March 2020 and currently due to run until 29 May 2020 (though it may be extended).

Firms can top up salary to 100%, but this is not obligatory. The JRS Grant is available where furlough is used to safeguard workers from being made redundant. Any workers to be furloughed must have been on the payroll at 28 February 2020, although it is possible to include those who have been made redundant since that date if they are reemployed.

Kate Naylor’s blog post looked at furlough from the perspective of owner managed business directors so I won’t repeat that here.

Get employment law advice

It’s important to make sure that you’ve taken appropriate employment law advice. For example, if you’re not topping up to full salary and you don’t have a contractual clause in employment contracts to enable you to make layoffs, you must have employees’ consent to place them on furlough and normal considerations about avoiding any unlawful discrimination apply.

Qualifying for the JRS grant

To qualify for the JRS grant, furloughs must run for a minimum of 3 weeks and for some businesses it will make sense to bring people on or off furlough according to particular business needs. It’s vital that employees do no work for the business whilst on furlough. HMRC are likely to step up PAYE audits once this pandemic is over to check that people were playing by the rules – so consider what processes you’ll need to put in place and how you’ll be able to demonstrate this.

Because you will be using this measure in order to retain employees for the medium to long term, it’s worthwhile considering how to keep your team connected and supported whilst they’re away from the business – regular online social catch ups and access to internal firm communications could help.

When will the cash be available?

There will be a lag until the cash is available to cover furlough payments – HMRC hope to have a portal for grant claims up and running by the end of April but it’s not yet clear how quickly cash will be paid following that. This means that unless you’ve also obtained employees’ consent to delay payments, the business will need to fund at least the 80% salary cost for April pay-runs.

What happens on the other side of furlough?

Whilst there are indications that the JRS may be extended, this is far from guaranteed and it’s important to plan for coming out of furlough as well as going in. How quickly will your business be able to return to profitable trading? Will this be impacted by holes in your supply chain as a result of the crisis? Despite furlough, will you still need to make some staff redundant, and if so, when should you go through this process (notice periods and redundancy costs need to be factored in)?

If properly applied for, you won’t need to pay the JRS grant back, but many other Covid-19 support measures are deferrals of liabilities and the business needs to generate the cash to repay them down the line. Forecasting and scenario planning around this will be key to taking sensible decisions and giving your business the best chance of ongoing survival and success.

Finally, it’s likely that any business looking to apply for a Coronavirus Business Interruption Loan (CBIL) will need to demonstrate that it’s already taken all possible available measures including utilising furlough where appropriate. So, businesses may need to demonstrate they’ve considered furlough even if they decide it’s not for them.

Further information and support

You can find further information from the government here: Coronavirus Job Retention Scheme

We can help with forecasting and scenario planning, just email Paul Lodder.

You can contact our payroll manager, Andrew Senior, for assistance in calculating furlough payments and applying for the Job Retention Scheme Grant.

Ali Jones
Ali Jones
Consulting & Corporate Finance Partner

Ali provides strategic planning, consulting and corporate finance solutions to help clients to deal effectively with problems and make the most of business opportunities.

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