Today, the COVID-19 Job Retention Scheme Update was announced by the government to provide further clarity on how the scheme will operate.
According to the announcement, the scheme will be backdated to 1 March 2020 and provided staff remain employed throughout the crisis the funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities.
The announcement further explained that the grants will cover 80% of furloughed employees’ (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
HMRC Step by Step Guide for submitting claims
The cashflow dilemma for employers
The major stumbling block for employers is cashflow to fund the March 2020 payroll because the government is expected to cover 80% of both March and April payrolls at the end of April 2020.
One option is to take out a business interruption loan or overdraft which is being guaranteed by the government and interest free for 12 months. Unfortunately, some banks are requesting personal guarantees which may deter some directors from considering this option.
Employers may also utilise the COVID-19 Time to Pay Scheme and the VAT Deferral scheme to free up cash resources to pay employees while waiting on the government Job Retention Scheme funds.
However, it is almost predictable that the majority of the business interruption loans and overdrafts secured under the government’s 80% guarantee will go bad and get hived off to the British Business Bank as COVID-19 bad loans.
The government’s 80% guarantee doesn’t equate to free money to employers and directors giving personal guarantees. These loans and overdrafts will have to be paid back by employers for as long as it takes or they will go to the wall.
Therefore, the dilemma is whether employers protect their own future or act in the national interest and provide for their staff during the COVID-19 crisis.
The COVID-19: Job Retention Scheme Update was sponsored by Canalitix.com