Tick, tock, tick, tock, the countdown to the end of the Furlough Scheme has started…   

Today, Tuesday 28 September, represents the last 3 days that eligible employees can be either fully furloughed or flexi-furloughed.  

Claims covering the period up to 30 September need to be submitted by 14 October and then we enter the post Furlough period for Employers.   

What does this mean and what may be the consequences to this?

There are two conclusions that I can make given the relatively high numbers of staff that remain on furlough in some form.  The first is that Employers are currently carrying more staff than they need either due to a reduction in business or in general that has become evident from proper business planning during the pandemic.   The second is that the scheme is likely to have been exploited by Employers to fund salaries that it shouldn’t have as there was no requirement to do so.  

What does the future post Furlough potentially look like?

Firstly, we may see that many of those employees currently still fully furloughed are made redundant as businesses assess that financially, they cannot afford to take them back on full time. There are alternatives to redundancy and employers should consider these before making a rushed decision that could jeopardise the business by creating an employment shortage.     

Alternatives that could be considered are:

  1. Negotiations with employees to permanently reduce their hours. The correct HR procedure should be followed and employers may find that there is more appetite than they expect for this.  It would be better to keep an employee with knowledge of the firm and processes than to take on new staff where training and downtime will be incurred.
  2. Negotiate a temporary change in hours, again ensuring the correct HR process is followed.
  3. Ask employees for solutions, never discount the opinions of your employees as they may surprise you with an alternative that hadn’t been considered.

If redundancies have to be made, consider asking for voluntary redundancies first before engaging in the formal redundancy process. 

Secondly, it is inevitable that we will start to see more PAYE compliance visits/reviews in which Furlough Claims will be the main topic of review. We have already seen a couple through our own client base and it is important that as Employers you are prepared.      

  1. Ensure that you have a clearly defined list of all employees and the periods that they were either fully or flexi furloughed.
  2. Ensure that you have copies of all the relevant agreements that needed to be in place for any employee that was either furloughed or flexi furloughed.
  3. Ensure that you have clearly defined calculations as to how you calculated the base salary for furlough payments and for any flexi furlough claims.

Do I see Furlough returning? Currently no – I do not except in extreme circumstances of forced closure due to Covid restrictions (industry driven). The Government has given away far too much support which will in some circumstances has been exploited and it ultimately needs to be paid back by tax payers. We have already seen the announcement of the new National Insurance rate and I fear tax increases will follow in the years to come.

If you are concerned that your Furlough documentation may not be up to standard, please contact us for a PAYE healthcheck where this could be checked for you.

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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