The reality of Furlough employees and Government support

Everyone is talking about Furlough employees and the fact the Government will fund 80% of the salaries of such employees from 1 March 2020.

Many think this Government scheme applies to ALL employees – this is not so and there is a small print.

The Government is not compensating organisations for loss of income. These organisations can be mosques, charities or businesses – the purpose of this funding is not that and the Government will not compensate for loss of income.

As a result of the current lockdown, organisations suddenly had staff that could not work anymore and businesses were at risk of going down under. The immediate response of businesses would have been to let staff go. This is when the Government stepped in and said that they will fund 80% of such staff that either have been made redundant or at risk of being made redundant.

This Government support is so that staff are NOT made redundant and kept on the business or charity payroll.

The Government said to treat such employees on leave “Furlough” and these employees MUST NOT work at all for their employers. If they do work, be it part time or with reduced wages that implies that they were not at risk of losing their jobs, so such employees are not covered by the scheme. In practice many employees will fall in this situation as businesses and charities will do whatever to keep the ball rolling.

The Government expects each employer to determine the employees that are or should be on leave for this lock down (i.e. 3 weeks) and declare them as Furlough employees by formally writing to them. These employees must not then work for that employer during this period.

Although this scheme keeps staff at risk employed, it does nothing to address the loss of income or donations in the short term or long term. The effected organisations must develop their own plans to address the impact of this interruption.

The Government has asked the banks to give loans to businesses or charities, backed by Government. The banks being banks have started to pick and choose. They are applying their normal due diligence and at times are requesting personal guarantees. Not sure how far this will address the issue in its current state.

There is some support for small cash donations from Local Councils – this is focused on small retail businesses and may take time to get through.

I sense turbulent times and it is imperative that organisations, be it large or small, plan ahead to weather this perfect storm.