Paying wages after furlough

4th May 2020

UPDATED 16 October 2020

Whilst the furlough scheme will have eased the problem of paying wages during the lockdown, the ending of the scheme 0n 31 October will leave the problem of how to fund those wages.

From 1 November there is a less generous Job Support Scheme for those who continue to work in viable jobs but on reduced hours.

Even if sales are slow to pick up, you will still need to pay those increasing wage costs, and it is better to work out now where those funds might come from.

Options might include:

  • Loan funding – you might not have considered this at the outset, but it is crucial that you project your cashflow forward for several months to see what you might need. The Bounce Back loans, CBILS, CLIBLS and Grant Support Schemes will be open until 30 November 2020; See our Business after COVID-19: Transition Knowledge Hub for more details.
  • Flexing terms of invoice discounting arrangements, if that is your primary source of funding, to get extended terms on the initial sales;
  • Consider a Time-to-Pay arrangement with HMRC for the PAYE and NIC element of your payroll. If you have a good track record and a sensible case, HMRC are likely to be supportive, and it is better to ask up front rather than when the taxes are overdue. This also applies if you have corporation tax payable in the next few months;
  • HMRC has allowed the deferral of VAT payments from 20 March 2020 to 30 June 2020 until 31 March 2021, so if you took this up you can pay the amount deferred over 11 equal monthly instalments starting next year;
  • HMRC has also allowed the deferral of personal Income tax bills payable in July 2019 until January 2020, for partnerships and sole traders - you can apply for a Time to Pay arrangement;
  • If you have significant suppliers or customers, consider asking if they can extend credit (suppliers) or pay early, perhaps with a small discount to compensate;
  • Speak to landlords to see if rent can be deferred or waived for a quarter;

These are just a few options – it is crucial to plan now for the return to work and not wait until the support schemes have ended. 

Share

Keep up to date

Key contacts

Related insights