The Job Retention Scheme has proved an invaluable lifeline for many businesses as they weather the storm brought by COVID-19 and the ensuing UK lockdown. With many companies and workplaces forced to close in line with social distancing measures or experiencing a downturn in sales and output during this challenging time, the Job Retention Scheme has allowed these businesses to retain their staff’s jobs without having to foot the cost of wages.

The latest British Chambers of Commerce Coronavirus Business Impact Tracker found that 74% of firms have furloughed at least some of their staff, highlighting the popularity of this government-backed financial scheme.

Currently, the scheme funds 80% of the wages of any furloughed staff for the period they are not working – but earlier this month, Chancellor of the Exchequer Rishi Sunak announced upcoming changes to the scheme as lockdown measures ease.

In this blog, we are detailing precisely what has changed and what the impact may be for your business.

What has changed with the Job Retention Scheme?

As of yet, nothing has changed with the scheme, other than it has been extended. Businesses are still able to apply for funding of 80% of their employee’s wages from the HMRC, up to a cap of £2,500 per month, providing that those staff members do not undertake any work for a period of at least three weeks.

In his announcement, the Chancellor of the Exchequer stated that the Job Retention Scheme would be extended to October – but the scheme will only run in its current form until August. From August, employers will be expected to contribute to their staff wages while still receiving some support from the government. By adding partially to staff wages, businesses will be able to place their staff on part-time work, allowing them to return to standard work gradually. Employees sent home due to COVID-19 symptoms will continue to be able to get 80% of wages during their time in isolation.

The government has not announced how much they will contribute to employee earnings from August, though reports suggest this will be 60% – a reduction of one-quarter. Details have also not been made available about how part-time work will operate under the scheme, although this is likely to be detailed in further announcements.

What are the implications for business?

The announcement to the Job Retention Scheme has been met with mixed reception, with some praising it for providing ongoing support to businesses coping with the fall-out of COVID-19 and others stating the future measures of the scheme will not go far enough to help struggling employers.

The extension of the scheme in its current form should provide relief to businesses who are unable to return to standard operations now, allowing them to continue to keep their staff on board over the coming months without having to find the funds to pay their wages. The extension also aligns with the timeline of lockdown easing, as outlined by the prime minister, with the majority of businesses likely to re-open by August.

Although businesses are unlikely to be working at full capacity by this time, particularly with social distancing measures still in place, the re-introduction of staff on a part-time basis could allow businesses to work towards good productivity, while allowing employers to improve cash flow and profit before having to commit to paying full-time wages unsupported.

However, on the flip side, the current lockdown measures in place in the UK are likely to have seismic effects on the economy moving forward, which realistically will not be resolved in a matter of months. Social distancing means that businesses will have to run at a reduced capacity, leading to a downturn in their revenue, which could have a knock-on effect on their cash flow until pre-lockdown normality can resume – which could be years away.

This means that, by the end of August, some businesses will still be struggling financially, and may be unable to contribute to staff wages – even at a reduced rate. They may also still be struggling when the scheme comes to a complete stop in October. Businesses will, therefore, need to seek alternative solutions to their funding issues or may face having to make staff redundant. As such, there have been arguments that the scheme should be extended until the British economy has fully recovered to give businesses and individuals the best chance of survival. 

Other criticisms of the scheme have included the argument that part-time employment should be a viable option now, allowing businesses to restart their operations gradually rather than suffering another two months of hardship if they do not have the funds to bring back staff members full-time.

Getting funding support for your business

While the Job Retention Scheme offers assistance to businesses struggling to pay the wages of their staff, there may be a situation in which companies require funding beyond the scheme – particularly once the changes come into effect. This may include funding to help you bring back staff from furlough now or improve your cash flow ahead of employer contributions to the scheme in August.

Other government-backed loans currently available to businesses during the COVID-19 effects include the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme. Beyond this, companies can utilise a wide variety of different funding solutions – ranging from trade finance to alternative lender loans – which can help you to acquire the investment you need to be able to bring your staff back on either a full-time or part-time basis, as well as begin your financial recovery.

The key to getting the right funding for your business is to put together a cashflow forecast to identify exactly what your business truly needs over the next 6 to 12 months.

If you need guidance on how to access funding for your business during these trying times, our team of financial experts is here to help. With expertise across a range of business sectors and funding types, we can talk you through the options out there currently, assist with your finance applications and work with you to create a plan for the future of your business cash flow.

Please call the team today for a free consultation or email [email protected].