Updated: 17th October 2020
The Coronavirus Job Retention Scheme (CJRS), also known as furlough, ends at the end of October 2020 and is to be replaced by a new initiative called the Jobs Support Scheme. This involves the government subsidising part of employee pay if they have their working hours cut due to the economic effects of coronavirus.
The Chancellor hopes to support jobs and businesses by introducing this scheme, which comes into effect on 1st November 2020, and reduce the number of redundancies that small businesses affected by Covid-19 have to make.
But what does it mean in practice for your small business, and will you be able to cope with the reduction in level of government help after the extremely popular and successful furlough scheme?
Under the Jobs Support Scheme full time workers who have their normal hours cut will receive one third of pay from the government for the hours that have been cut. You will pay all of the hours they work, plus also one third of the hours they don’t work.
This means the member of staff loses a third of their pay for their ‘standard’ number of hours if you have to reduce them - the scheme is intended to help you retain your staff rather than make redundancies.
Many businesses are suffering financial distress as a result of the coronavirus pandemic and subsequent restrictions, and it may be the case that you can’t afford to retain some or all of your employees even with the Jobs Support Scheme.
For this reason redundancies may be unavoidable simply to keep the business going, but you also need to be aware of the possibility that your business could be entering insolvency through lack of cash.
So what if your business is insolvent or you feel that insolvency is looming? Is there anything you can do to prevent the business closing down?
Various forms of alternative funding are available for small businesses - they can provide much needed flexibility when compared with some standard bank loans or government backed coronavirus loans.
Invoice finance is a broad term used to describe a type of lending that relies on the value of a business’ sales ledger. If your customers generally pay on time and you operate with low levels of bad debt, factoring or invoice discounting could offer significant help if you’re struggling to pay your staff. Regular cash injections could help you avoid insolvency, whilst you guide the business out of financial distress.
But what if the business is already insolvent? The UK operates a supportive regime of insolvency measures that can protect a business from closure. These include, but are not limited to:
For more information on the Jobs Support Scheme and what it means for your small business, please contact one of the team at Real Business Rescue. We operate an extensive network of offices around the UK, and offer free same-day consultations.
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