Businesses facing difficult decisions on furlough scheme
Businesses are faced with a critical decision on whether to furlough more workers tomorrow (Wednesday) , but without knowing how the government plans to fully re-open the UK’s economy, say leading tax and advisory firm Blick Rothenberg.
Nimesh Shah, a partner at the firm said: “The government have not provided a road map for businesses, so how can employers be expected to make a decision tomorrow (Wednesday) on whether to furlough more workers, so that they are eligible for the new Flexible Furlough scheme which starts from 1 July.”
The new Flexible Furlough scheme will allow employers to bring furloughed staff back into work on a part-time basis. But the new scheme is only available if an employee had been placed on furlough for a continuous period of the 3 weeks between 1 March and 30 June.
For any employees that have not previously been placed on furlough, the cut-off date is Wednesday (10 June) so that they can complete the minimum 3-week requirement before 30 June.
He added: “I can understand why the government decided to introduce the cut-off for the furlough scheme, but they also need to recognise that there are a number of businesses who have yet to re-open their doors. In the grand scheme of things, the government should have allowed businesses to have future flexibility. The overall cost to the government could have been marginal, compared to employers now rushing to unnecessarily place some workers on furlough.”
“Many businesses have been relying on the furlough scheme to survive over the last few months; employers have had to make some difficult decisions to furlough workers and the 10 June deadline presents another important call. Some employers may be tempted to place an employee on furlough so that they have the option to use the new Flexible Furlough scheme from 1 July. The government faces the risk that workers could be unnecessarily placed on furlough on 10 June.”
Nimesh said: “Many businesses are still uncertain of the future. In particular, businesses operating in tourism, leisure and hospitality do not have visibility of when they may be able to welcome customers; in the present economic situation, it’s impossible for businesses to project what their needs may look like in the months to come. It’s quite possible that many could take the decision to place additional workers on furlough on Wednesday so that they at least have the option under the new scheme.”
He added: “The chancellor’s decision to extend the furlough scheme to the end of October has been greatly welcomed – however, businesses may not be aware of the change to the scheme from 1 July and could find that they are not able to furlough an employee because that employee had not been placed on furlough for 3 weeks between March and June. The change in the rules could leave some employers left short and they may be forced to consider redundancies.”
