Insolvency experts are urging directors of Covid-hit businesses to use the final month of the furlough scheme to plan for the future and address any financial issues they face.
The scheme ends on September 30, and employers have until October 14 to claim wages for staff who have been put on Furlough during that month. Under the initiative, the Government will pay up to £1,875 per furloughed employee to cover 60 per cent of their wages throughout September, with employers required to contribute a minimum of 20 per cent.
The insolvency and restructuring trade body R3 says directors should use this time to review their financial position and to seek advice about the options open to them.
“Businesses have another 30 days where Government will underwrite a large percentage of their wage bill. Directors need to use this time wisely, explore their options for resolving any issues they face, and develop a plan for how they’ll address them,” Deputy Vice President Nicky Fisher said.
“In particular, anyone seeing signs their business is financially distressed – which can include problems paying wages, being unable to pay suppliers on time, or issues with cashflow – needs to seek advice from a qualified source before the problem gets out of hand.
“Talking to someone about the problems your business faces at an early stage means you have more potential solutions open to you and more time to take a decision about how you move forward. It’s very hard to have that conversation, but starting it early generally leads to much better outcomes for you and your business than if you put it off.”
Making sure your business conducts relevant retraining is a vital investment in making sure your people are set for a successful return
R3 has developed a free guide for company directors, which outlines their duties under the Companies Act, the common signs of business distress, and the full range of restructuring and insolvency options that are available to distressed companies.
The pandemic has disrupted trading for nearly a year and a half, forced around 1.6 million businesses to borrow more than £79 billion from the government and, at the peak of the pandemic, furlough nearly nine million staff.
Birgitte Pihl, Chief People Officer at the workplace management platform Planday, said she recognised that discussing the return to work or potential changes with staff can be “challenging”. She added: “Approaching these conversations with sensitivity is vital. Allow people time to digest all the new changes and make sure that you are proactive as a manager and offer ongoing support whilst they adapt.
“Many UK businesses – especially those in hospitality and hotels – spent a lot of time closed during the past 18 months. As consumers return to hospitality venues and the all-important tourism sector roars back to life, some staff will return to vastly-different workplaces than before. Making sure your business conducts relevant retraining is a vital investment in making sure your people are set for a successful return.
“Ensure you put time aside for dialogue and close interaction to understand what people need to do their best work when they return. Nikolas Opacic, owner of Manchester restaurant Seven 54, said: “When it comes to approaching difficult conversations around the impact of the Furlough scheme ending, we are very transparent with our team. Everyone knew the furlough scheme would come to an end eventually, so it’s about communicating with each other and sitting down to see how we can help.
“It’s to everyone’s understanding that we have had to take on small amounts of extra responsibility and so far our team has been very receptive. It’s wonderful to know that our employees enjoy working for us, and that they want the company to be successful, too”.
Download a copy of R3’s guide here
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