Paying wages after furlough

4th May 2020

NOTE: It is now too late to put somebody on furlough for the first time, as 10 June was the last day.  But if someone is or has previously been on furlough, they are eligible to continue until the scheme closes on 31 October 2020. However, the 10 June cut-off date does not apply to those who are returning to work after paternity or maternity leave.

Whilst the furlough scheme will have eased the problem of paying wages during the lockdown, the ending of the scheme in October will leave the problem of how to fund those wages.

Even though the government has announced a phased return to work from July, the scheme is structured so that from 1 August there will be a cost to the employer.

Even if sales are slow to pick up, you will still need to pay those increasing wage costs, and it is better to work out now where those funds might come from.

Options might include:

  • Loan funding – you might not have considered this at the outset, but it is crucial that you project your cashflow forward for several months to see what you might need. The Bounce Back loans, CBILS, CLIBLS and Grant Support Schemes will be open for a little while; See our Business after COVID-19: Transition Knowledge Hub for more details.
  • Flexing terms of invoice discounting arrangements, if that is your primary source of funding, to get extended terms on the initial sales;
  • Consider a Time-to-Pay arrangement with HMRC for the PAYE and NIC element of your payroll. If you have a good track record and a sensible case, HMRC are likely to be supportive, and it is better to ask up front rather than when the taxes are overdue. This also applies if you have corporation tax payable in the next few months;
  • HMRC has allowed the deferral of VAT payments from 20 March 2020 to 30 June 2020 until 31 March 2021, so take this up;
  • HMRC has also allowed the deferral of personal Income tax bills payable in July 2019 until January 2020, for partnerships and sole traders;
  • If you have significant suppliers or customers, consider asking if they can extend credit (suppliers) or pay early, perhaps with a small discount to compensate;
  • Speak to landlords to see if rent can be deferred or waived for a quarter;

These are just a few options – it is crucial to plan now for the return to work and not wait until the support schemes have ended. 

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