Furlough schemes extended to 31 January

On 29 September 2020 the furlough schemes were extended to 31 January 2021, with new categories for companies forced to close or limit their activity because of restrictions. It was the third time the mechanism had been extended, and each extension confirmed that the recovery would be neither quick nor uniform. Every time a mechanism is extended, protection continues, but the need to check its conditions is also renewed.

For companies that were still using the schemes, the news brought continuity but also complexity. The existence of different categories depending on the type of impact meant analysing which one each case fitted, and verifying that the conditions were met. A rule that is extended is not a rule that stays identical: each change can alter rights and obligations. That is why it is not enough to rely on what was learned on earlier occasions.

A third extension

With the third extension, the furlough schemes ran until 31 January 2021. The novelty lay in the new categories: a distinction was drawn between companies forced to close by restrictions and those whose activity was merely limited. Each situation had its own conditions, and not all offered the same advantages. The differences can affect the amount of the relief and the obligations to maintain employment.

The distinction follows a simple logic: a company that is forbidden to open is not the same as one that can open with restrictions. That is why the conditions of support were graded according to the degree of impact. For the business owner, the challenge was to identify precisely which category the business fell into, and to remember that the category could change if restrictions were modified. A periodic review, month by month, helps avoid staying in a category that no longer applies.

A succession of rules

The stream of new rules demanded keeping up. With each extension, requirements, relief and commitments changed, and what was valid in one period might not be in the next. A small business without a legal or HR department ran the risk of applying old rules to new situations. And a mistake of interpretation is paid for in costs, penalties or aid that has to be repaid.

This risk is not hypothetical. A business owner busy keeping the business going hardly has time to read every new provision, and relying on what was known about the previous one is an understandable temptation. But in a framework that changes often, outdated information is a source of errors, and it helps to have a reliable channel that filters what is relevant for each company. It may be an external adviser, the payroll firm or an internal manager with the time to do it.

The cost of a mistake

For a small business, losing relief over a procedural mistake could cost more than any adviser. It is therefore practical to have someone who follows the changes, checks which category applies to each employee and verifies that deadlines and notifications are met. It is a small investment compared with the risk of having to repay aid. It is worth remembering that the amounts involved in contributions and benefits are significant for cash flow.

Besides reviewing the rule, it helps to keep an orderly record of each affected employee, with the dates and conditions that apply, and a calendar of notification and filing deadlines. With those tools, the company can respond quickly to any request and show that it acted diligently. It is work of order and constancy, rather than of great decisions.

In employment matters, prevention usually costs less than correction.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.