The final furlough: the job retention scheme is winding down

Job losses loom in sectors that have yet to reopen fully

(Image credit: © Getty images)

last updated 17 August 2020

Small businesses face some difficult decisions. With the government’s Coronavirus Job Retention Scheme now winding down, they must assess the costs accruing for furloughed staff and determine whether there is work for them to

return to.

Under the scheme, the government reimbursed employers for up to 80% of furloughed employees’ salaries, up to a maximum of £2,500 a month. The state also covered the cost of these employees’ national insurance (NI) and pensions contributions.

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That enabled employers to keep these staff on their books even if work had dried up. There was little or no cost to keeping them employed, though some firms topped up staff wages beyond the 80% cap. However, since 1 August, employers have become responsible for paying NI and pension contributions.

From 1 September, the government’s wage subsidy will drop to 70% of wages, up to a maximum of £2,190 a month, and then to 60% from 1 October, up to a maximum of £1,875 a month. Employers will have to top up wages to the 80% level – or higher if they have previously agreed more generous payments. The scheme will then close completely on 31 October.

A final payment

However, employers will receive a £1,000 payment for every worker furloughed who is still on their payroll at the end of January 2021. That cash will cover at least some of the increased costs of the scheme while it is still in place, and of paying staff thereafter. Still, many employers are reaching the point where they can no longer put off the issue of job losses, particularly in sectors that have not yet fully reopened.

No employer likes making redundancies and it may be tempting to wait until the end of the scheme to assess the prevailing market conditions before making any firm decisions. But if money is tight, that may not be an option. There are strict rules on how employers must manage redundancy, including a statutory duty to consult on job losses for at least 30 days if 20 to 99 people are being let go.

Still, talking to staff now may also give you a chance to explore other options. For instance, while the scheme is coming to an end, you can still leave staff on furlough if they agree; you’ll have to pick up the costs of their employment in full, but staff may be prepared to accept lower pay for a further period if it means keeping their job.

You can also ask staff to consider pay cuts, reduced hours or part-time working if it will help buy time until trading improves. Start thinking about these conversations as soon as possible.

Don’t miss out on grants

Small businesses are set to miss out on more than £1bn of grants that could help them temper the impact of Covid-19, the Local Government Association (LGA) is warning. The government has told local authorities it will close three funding schemes implemented earlier in the year to provide crucial financial support.

The Small Business Grant Fund, the Retail, Hospitality and Leisure Business Grants Fund and the Discretionary Grant Fund will all shut up shop on 28 August. Local authorities have received central government funding to cover the cost of the schemes, but any unclaimed funds will have to be returned to the government. The LGA believes that thousands of businesses have yet to claim support they are due, with the total amount of grant cash still available estimated to be worth £1.37bn.

While local authorities have paid grants to many businesses automatically, they do not hold full information on thousands more that may also be eligible. Businesses that haven’t yet received a grant and think they may be due a payout should therefore contact their local authority as soon as possible.

l The government has unveiled a new £20m fund aimed at supporting businesses developing new technologies and services that could help the UK become more resilient in future pandemics and similar emergencies. The fund will offer grants of up to £50,000 for businesses innovating in areas such as tools that enable retailers to respond more effectively to spikes in consumer demand, services that help families connect with vulnerable relatives, and education tools that boost home learning.

l Also offering support for small businesses is American Express’s Shop Small scheme. Until 13 September, the initiative rewards American Express cardholders with £5 cash back when they spend £10 or more in small companies participating in the initiative. Cardholders can earn the cashback ten times, though only once at each retailer.

Videoconferencing for the long term

Which videoconferencing tool is right for your business? The work-from-home phenomenon looks likely to endure beyond the pandemic, even if staff eventually return to a mix of office-based and home-working. So choosing the best videoconferencing tool for your needs is crucial.

To some extent, this is a personal choice, depending on which tools your staff are used to and feel comfortable with, and the facilities your firm needs. On features and usability, reviewers at PC Magazine give Google Meet and Zoom the edge over Microsoft Teams when it comes to the three videoconferencing tools currently dominating the market.

Zoom wins plaudits for how easy it is for participants to join calls and to select options such as muting sound and video, as well as for features such as data on the quality of connectivity on every participant. Google Meet also scores highly on ease of use, with reviewers praising its intuitive controls.

On the downside, some concerns remain about security and privacy at Zoom, though the company has moved quickly to address them. Google Meet hasn’t received such criticism, but isn’t a standalone product; rather, it comes as part of a bundle of tools with the G Suite service. Microsoft, meanwhile, wins less support from reviewers, and Teams is also usually part of a bundle – the software giant’s Office 365 package.

On pricing, Zoom offers a basic service free of charge, but this limits call duration and certain features. Business users will probably want at least the £15.99 per month package, which gives you the right to nominate ten different hosts for calls.

Microsoft Teams works in a similar way, with a limited version available free of charge, but tiered pricing for more extensive services, as part of the 365 bundle. Small businesses will pay at least £3.80 per user a month for 365 Business Basic, or £9.40 for Microsoft’s standard enterprise solution. Finally, Google’s standard price for its G Suite business service is £8.28 per user a month, though it currently offers special terms related to Google Meet.

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David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.