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Employers face difficult choices

The furlough scheme has enabled employers to defer decisions about their workforce – who to retain, who to let go – but as from the beginning of August 2020, employers will be obliged to meet the furlough costs on an incremental basis.

Another change this month, July 2020, is that employees can be invited back to work on a part-time basis. Where this is actioned, the costs of the part-time activity will need to be met by the employer and the government will continue to cover the out of work, furloughed costs. 

In his Summer Statement last week, the Chancellor, Rishi Sunak, offered another incentive to employers to retain furloughed staff after the formal Coronavirus Job Retention Scheme closes 31 October 2020.

Aptly called the Job Retention Bonus, the new incentive promises to pay employers if they retain employees for the period November 2020 to January 2021. The bonus will amount to £1,000 for each qualifying employee retained in this way.

The bonus will apply to furloughed employees who remain continuously employed through to the end of January 2021. Employees must earn above the National Insurance Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July 2020.

Whether the additional enticement to retain staff will delay decisions on head-count remains an unknown, but as large-scale redundancies announced recently demonstrate the outlook for the jobs market is looking bleak, especially for those involved in sectors badly affected by the lock-down process.

Planning is required

What is evident, is that decisions will require careful planning. Government incentives will need to be considered but are incidental to the over-riding need to quantify the likely scale of future sales, costs, profitability, cash-flow and solvency.

Employers will need support to plan and we can help. If you are still undecided about your options as we tentatively emerge for lock-down, please call so that we can help you consider your options.