Notable advertising executive Bruce Barton once said: “When times are good you should advertise, when times are bad you MUST advertise”.

First expressed more than 100 years ago, this maxim has since become a staple of the marketing sector, and is as relevant now as ever, as the economic impact of COVID-19 is being felt all over the world.

It is a common instinct for businesses to cut their advertising spend in the wake of an economic downturn, believing that consumers are spending less and it is most important to save money during this time.

However, research has found that marketing during a recession is key to business survival.

In a study of U.S. recessions, focusing on 600 companies over the period from 1980 to 1985, McGraw-Hill Research found that businesses who maintained or increased their advertising budgets during the 1981-1982 recession saw greater profits overall.

In fact, by 1985, the research showed that profits of companies that were the most ambitious with their recession advertising saw an average of 256% more growth than those who decreased their advertising spend.

 

Benefits Of Advertising During A Recession

There are plenty of reasons that a business might want to step up their advertising efforts during the incoming recession. Some of the key benefits are:

1. Visibility. As mentioned above, the instinct for most businesses will be to reduce their advertising efforts, meaning that the companies who do continue to advertise have better visibility in their own sector. This is the perfect time for brands to reposition themselves in their market, or introduce a new product or service.

2. Stability. When other brands go quiet, businesses who remain visible project an image of stability to consumers, who will be more comfortable spending money with a company that they see as secure.

3. Cost of advertising. During times of economic crisis, the prices for most things go down to encourage people to buy, and advertising is no different. More affordable advertising can open new avenues for brands to explore and thus reach new customers.

4. Mind Share. Mind share marketing means developing your brand so that it is the first company a consumer brings to mind when thinking about a specific product or service. For most people, this will occur because of an emotional connection they have with the brand. Tied in with visibility, if your brand can take over the ‘share of mind’ from another brand that has decreased ad spending, you should also be able to increase your ‘share of market’ and thus boost sales.

 

A Recession Is The Perfect Time To Gather Data

Economic downturns are inevitable. Whilst huge, global recessions are not very common, there have been smaller periods of economic decline roughly every four years since around 1900. The current recession provides smaller opportunities for advertising and sales, perhaps, but much greater opportunities for gathering data and learning about your customer base.

Through tracking and monitoring your marketing strategies, you will learn more than ever about how your target audience behaves in times of difficulty, allowing you to plan for the worst and have quantifiable strategies in place for the next time the economy falters.

This is why advertising strategies that offer opportunities for observation and documentation are key during this time. Some of the best opportunities include:

Search Engine Optimisation

This is the perfect opportunity to rank higher in SERPs, using your understanding of how user behaviours are changing, and using newer keywords and updated strategies for organic search.

 

Paid Ads & PPC

As demand for certain services declines, so to do the brands vying for attention on search engines. If you choose to use some of your advertising budget for paid advertising, those ads will receive more visibility than ever before.

 

Social Media

Social media advertising is often the cheapest and easiest to manage, but it is also the area which advertisers most often drop in the wake of economic uncertainty. This is the perfect outlet for your brand to focus on if you don’t want to spend too much money but want to interact with and reassure your customers.

 

How To Market During A Recession

As described by the Harvard Business School in 2009, the average consumer falls into one of four groups:

1. The ‘slam on the brakes’ consumer style refers to those most affected by the recession. This will apply to some of the lowest-income consumers, but also to higher-income consumers with high financial anxiety. This group will reduce all types of spending immediately, and are the hardest for advertisers to reach.

2. ‘Pained-but-patient’ consumers reduce their spending in the same way as slam-on-the-brakes consumers, but less aggressively, remaining optimistic about their financial position and abilities to maintain their current standard of living.

3. ‘Comfortably well-off’ consumers have a steady and comfortable income stream, and are able to negate the majority of the difficulties caused by the recession. They are most likely to maintain their current spending levels without making major changes.

4. ‘Live-for-today’ consumers tend to be young and urban, and feel unaffected by the recession. These consumers tend to spend money on experiences rather than material items and are unlikely to change their spending behaviours unless they become unemployed.

All four sectors will sort their purchases into four main groups:

1. Essentials – items that are central to their health and standard of living

2. Treats – luxury items that the consumer considers a justifiable purchase

3. Postponables – luxury items that the consumer can wait to buy

4. Expendables – unnecessary or unjustifiable purchases

With the exception of food, rent, utilities and medical supplies, in what category each consumer sorts purchases is largely individual.

Brands can take this knowledge and make it work to their advantage in marketing to consumers during a recession.

Evaluate Product Lines

Now is the best time to start assessing your products and services, looking for any weak spots and cutting out unnecessary items. During times of economic positivity, brands sometimes hold onto product lines that are struggling, in the hopes that they will pick up later on. A recession is not the time to do this.

Many brands have found success with streamlining their output and reducing the complexity of their broadest product lines. This gives you the opportunity to focus all of your marketing efforts on a smaller range of products.

It is important not to ignore innovation during this time, however, as often companies are able to change their products in a way that reflects the current market and needs of consumers, to make themselves more relevant than ever.

 

Be More Competitive

It is important to remember that all but the ‘live for today’ consumers will be cutting back on their spending for every purchase that they can, so making your product affordable and being more competitive in your market is crucial.

This is a good time for discounts and promotions, offering more to potential customers for less, whilst balancing this with the understanding that cutting prices too far can reduce customers’ perceived value of your products.

 

In Conclusion

The most important thing for any brand to remember with regards to marketing during a recession is that this is not ‘business as usual’. Adapting your strategy and employing a deeper understanding of your customer base is essential to taking advantage of the new opportunities offered by a recession.

Here at An Accounting Gem we can help you gain extra visibility into your finances and see if you are safely able to increase your marketing budget in order to grab more market share. To see how we can help, please call us on 01473 744 700 or send us an email at contactus@aag-accountants.co.uk. We are here to help you every step of the way.

 

The Construction Reverse VAT Charge Scheme has been delayed from 1 October 2020 to 1 March 2021 following the COVID-19 pandemic.

The Scheme involves businesses in the construction industry, where customers are required to pay across the VAT element of invoices to HMRC, rather than the supplier, in an effort to reduce fraud.

However, the Scheme has come under criticism for the effects it would have on the construction industry, and the burden it imposes on businesses that it will effect as well as their current lack of preparedness are causing serious concern.

 

What is the Construction Reverse Charge VAT Scheme?

How is VAT usually charged?

Value Added Tax, or more commonly known as VAT, is a tax charged by businesses that the buyer pays. However, the burden of paying it across to the government is with the business that has sold the goods. It is a scheme that effectively allows the government to collect tax, butplace the burden of administering and collecting it on businesses who have to charge it.

VAT is charged on goods or services when they are sold. The difference between the VAT on purchases (what is referred to as ‘Input VAT’) and the VAT on sales (what is referred to as ‘Output VAT’) is paid across to HMRC every quarter. Some businesses elect to do this every month, depending on what works for them.

The Construction Reverse Charge VAT Scheme is different

In an attempt to reduce fraud in the construction industry, there have been radical changes implemented by HMRC that impose rules on the companies that are targeted by the new laws that are very different from how VAT has been collected and reported historically.

The onus is now on the customer to pay the VAT charged on invoices directly to HMRC, rather than to the supplier, if they report under the Construction Industry Scheme (CIS).

It should be noted that this only applies to businesses that are buying or selling products between VAT-registered contractors and sub-contractors within the construction industry.

 

When does the Construction Reverse VAT Scheme apply?

The Scheme applies to certain kinds of construction services completed in the UK, along with the building and construction materials used within the services. It doesn’t apply for materials supplied independent of any construction services.

The charge is an extension of the CIS scheme, and for any services undertaken by the subcontractor, the contractor paying them will be responsible for paying them, net of any CIS deductions and National Insurance, as well as VAT. The contractor will be responsible for paying across the VAT to HMRC, not the sub-contractor who raised the invoice and completed the works.

 

What is the purpose of the scheme?

The construction industry has been notorious in the past for fraud and has been targeted by criminals because of the ease in which this has been achieved historically.

Similar schemes have been implemented in the mobile phone retailers and wholesale energy suppliers to good effect.

By implementing a reverse charge scheme, customers will pay the VAT charge over to HMRC, rather than to the supplier. HMRC then has more confidence in that they will receive their money, and the suppliers cannot disappear without paying their VAT bill, whilst pocketing further profit from the job they have completed.

 

Why has the Construction Reverse Charge VAT scheme been controversial?

The Scheme will lead to much more paperwork, increasing the burden on construction employers. In an industry where payments from customers are often delayed, it is likely to cause significant cashflow problems throughout the industry.

Many firms in the industry believe it will lead to problems with productivity and cashflow difficulties, which ultimately will lead to job losses and have a considerable financial impact on the sector as a whole.

Small businesses in the industry would be most at risk. A lack of funds could cause some to being unable to trade and having to cease trading permanently.

 

Introduction of the scheme delayed once again

The impact of COVID-19 has led to the implementation of the scheme being delayed once again until 1 March 2021, having been originally planned to be effective from 1 October 2020.

This come following substantial lobbying by the construction industry towards the government, citing the following issues:

• 39% of construction companies are unaware of reverse charge VAT
• 36% are unprepared for its implementation
• 30% have not even discussed it with their accountant or financial adviser

Despite a request for a 12-month delay to the scheme, government only agreed to postpone it for five months. HMRC are keen to continue with the scheme and want it implemented as soon as possible. Given that they estimate to collect £500m of tax per annum through the scheme, it is hardly surprising.

 

What to do next

The Construction Reverse Charge VAT Scheme looks set to be implemented from 1 March 2021, and will be a legal requirement. It is therefore important that businesses are prepared for it when it begins.

HMRC has suggested doing the following to ensure businesses are prepared:

• Investigate whether the Scheme applies to the business’s sales, purchases or both;
• Ensure that accounting software is sufficient and updated to deal with the Scheme;
• Consider what implications there are for the cashflow of the business, and plan for it in advance of the scheme becoming live;
• Ensure that staff responsible for charging VAT are familiar with the new rules and the date they will become law.

It would be advisable to review any contracts that construction businesses have, and to have conversations with customers and suppliers, so that measures can be put in place.

But most importantly, if in any doubt, speak to an accountant. Applying the rules correctly and ensuring that businesses have the correct processes in place may seem a bit of a minefield. HMRC will issue fines and penalties if it is not implemented properly, so seek professional financial advice to ensure that all processes and requirements are met.

An Accounting Gem are an experienced and friendly firm of accountants and are here to help if you have concerns about how you are going to cope with the new legislation. Please call on 01473 744 700 or email us at contactus@aag-accountants.co.uk to see how we can assist you and your business.

COVID-19 has hit the pockets of individuals and businesses across the world. Fortunately in the UK, there have been a number of schemes designed to support these people, in a bid to get preserve jobs and businesses, and to encourage the economy to grow.

One of the schemes is the Coronavirus Bounce Back Loan Scheme (BBLS).More than one million Bounce Back loans have already been approved, totalling to more than £30.9 billion.

 

Who can apply for the BBLS?

The BBLS was launched after it was claimed that the Coronavirus Business Interruption Loan Scheme was inaccessible for small businesses.

The scheme is open to businesses that meet the following criteria:

• The business must be based in the UK
• The business must have been trading before 1 March 2020
• The business has been adversely affected by the impact of COVID-19

Businesses should note that there may be certain restrictions if the business was classed as being ‘in difficulty’ as at 31 December 2019. This will mean that they must demonstrate that they were complying with additional state aid restrictions.

There are a number of industries which are exempt from applying for the BBLS. They are:

• Banks, insurers and reinsurers (although this does not include insurance brokers)
• Public-sector bodies
• Primary and secondary schools that are state-funded

Furthermore, the government has provided many schemes in order to protect individuals and businesses in light of the coronavirus pandemic.

Any businesses that have claimed the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the COVID-19 Corporate Financing Facility will not be eligible for the BBLS.

If a loan of up to £50,000 has been granted by one of the three above schemes, it can be transferred to the BBLS by 4 November 2020. This will need to be arranged with the lender.

The scheme is open until 4 November 2020, but the government may extend it beyond this date, depending on the COVID-19 situation nearer the time.

 

How long is the loan for?

The loan is for a period of up to six years, although it can be repaid earlier without any fees being applicable.

 

What are the main terms and conditions of the BBLS?

The loan is 100% guaranteed by the government, and in the first year, there is no interest to be paid.

After the first 12 months, the interest rate that will be charged on the loan will be at 2.5% per annum.

The scheme is available to small and medium-sized businesses, and allows them to borrow between £2,000 and 25% of their annual turnover, up to a maximum of £50,000.

As previously mentioned, if the business wishes to pay the BBLS loan back earlier than the original term, there are no fees for early repayment.

And, it is expected that a decision will be made within one or two working days (depending on demand), with a further day to wait for the funds to be deposited in to the nominated bank account.

 

Where to apply for the BBLS

There are more than 20 lenders that are currently offering the BBLS, including many of the main high street banks.

The lenders that are offering the BBLS and should be approached by the business via their website. On their website, businesses will be required to fill in a short online application form, and declare the eligibility of the business to claim for the BBLS.

Once the application has been submitted, the lender will decide whether or not they will offer the loan to the business, or if a separate type of finance would be more appropriate. The business will be responsible for paying the full amount borrowed.

 

If the lender rejects your application

If one lender rejects your application, the business can still apply to another of the lenders that are eligible to grant the BBLS to businesses.

However, the likelihood is that if a business has been rejected by one lender, it is likely to be rejected by others. It is therefore worth investigating the reason why and seeking professional financial advice to see if the reasons for it can be corrected, or if there are alternative forms of finance that are more suited to assist in ensuring the long-term future of the business.

 

Concluding thoughts

Whether it be for investment in systems to help with social distancing, such as a booking system, or for safety equipment, such as partitioning and signage, the BBLS could be an opportunity for businesses to access funding from the government to help them navigate through these unprecedented times.

With no repayments or interest incurred during the first 12 months, it provides a perfect opportunity to make changes to adapt to the new ways of living and working following the coronavirus pandemic.

It is strongly advised to consult with qualified financial professionals, such as accountants or financial advisers, to ensure that the business is accessing the most appropriate forms of financing to meet its needs, and to give itself the best opportunity of successfully securing this funding.

The qualified and experienced staff at An Accounting Gem can help you and your business navigate through the current crisis – advising you on the best types of finance available to you as well as being there for any accounting advice you need.

Please call us on 01473 744 700 or email us at contactus@aag-accountants.co.uk to find out more.

Bookkeeping is an essential part of any commercial business. From self-employed sole traders to multi-national conglomerates, a slick accounting operation will help businesses boost their profits and make smarter spending decisions. Accurate records are also a legal obligation for many businesses, such as limited companies, so it’s important for companies to stay on top their numbers if they are to keep HMRC happy.

Long before the digital revolution, book keeping was done the old-fashioned way. Typically this meant manually logging numbers and figures in a paper ledger and storing receipts and paperwork away in dusty filing systems. But the times have changed. Computers have revolutionised the way we all live, including the way businesses manage their financial affairs. Today, specialist accounting software has all but replaced the paper ledgers of old and is now the go-to way for businesses large and small to keep track of their finances.

Digital accounting software provides a wealth of benefits for businesses of all sizes. It can be used to accurately log expenditure and revenue and also help business owners to forecast their sales growth and manage inventories. It can provide bigger picture information about the health of a business, allowing companies to make more informed decisions about the direction of the business – and ultimately boost profits.

Although bookkeeping is a crucial part of running any business, it can also be a time consuming and onerous process. Running a business means juggling a range of different tasks, from managing staff to developing marketing strategy – and book keeping can feel like another burdensome task to contend with.

For small businesses in particular, maintaining the books can be a real challenge. Many smaller companies are still stuffing shoeboxes with receipts and hoping for the best when HMRC’s deadlines start looming. But this is a risky tactic however and can result in errors – not to mention a lot of headaches along the way and the possibility of not fulfilling the legal obligations set down by the tax man.

This is exactly why so many businesses are going digital with their bookkeeping needs. Software is helping to make the financial process smooth and easy and while the demands on businesses grow ever-stronger, digital bookkeeping can lighten the load and free up time for busy business owners and finance staff.

 

What records must your business keep and for how long

There are a range of legal obligations that businesses must meet when it comes to managing their company finances. These ensure that the company is taxed at the correct rate, staff are paid at the correct levels and VAT is charged at the right level.

The information that HMRC require from businesses may include:

• detail about money spent and money received by the company, including any government funding from Covid-19 support schemes
• information about any assets the company owns
• details of any debts owed by or to the company
• a list of stock the company owns by the financial year end
• information about the stocktaking process and information used to determine the stock figure
• a log of all products or goods bought and sold
• information about who these products and goods where bought from and who they were sold to

In many cases businesses will also need use this information to create the paperwork required for the annual accounts and company Tax Return.

 

What can bookkeeping software do for you

Bookkeeping software can make a huge difference to businesses of all sizes. One of the key advantages is the speed with which is can log and process data, as traditionally more time-consuming tasks involved in bookkeeping become automated. This makes data processing more accurate, more speedy and most efficient.

Bookkeeping software – also known as accounting software – has developed into a must have product for a range of businesses. It provides a one stop shop where all transactions can be recorded and processed in a quick and accurate way, which not only makes accounting less of a headache, but also provides a picture of the health of the business and can inform smarter decision-making going forward.

A huge variety of software packages are on the market, and many of them have additional features available which allow businesses to  manage billing, payroll, accounts payable, tax filing and financial reporting – alongside their bookkeeping.

 

Some of the key features accounting software can offer include:

Bank connections – many software packages provide direct connections with a company’s banking provider, allowing all transactions associated with the business to be transferred straight into the business bank account

Online ledger – it’s possible to use software to create a singular version of the books which can be accessed by range of people across the business, from the finance team to the business partners.

Dashboards – this is a visual snapshot of the business’s incomings, outgoings and other transactions which can be generated through a digital software package

Mobile notifications – many software packages can be linked up to smartphones so that alerts for key business deadlines are pinged straight to the handsets of selected staff

Quotes – another handy feature is to use software to generate quotes which can then be issued direct to customer. Customers can then digitally accept the quote with the simple click of a button

Online invoicing and payments – invoices can also be sent directly from the software package to the customer, offering them a range of digital payment options which then connect directly to the business accounts

 

Making Tax Digital makes computerised bookkeeping a must

Making Tax Digital is an initiative from HMRC to introduce digital bookkeeping into business operations up and down the country. The project aims to make recordkeeping more accurate and less troublesome for the business, with information relayed in real time from the company accounts straight to the tax man.

Business that are VAT registered or that employ staff are legally obliged to send their financial records digitally to HMRC, as part of the Making Tax Digital initiative. For these businesses, digital record keeping is an absolute must in order to comply with HMRC’s requirements.

But for those businesses beneath the VAT threshold, it’s also still wise to consider digital book-keeping – the process provides a wealth of benefits and the digital first approach is fast becoming the ‘new normal’. Although telephone and postal communication with HMRC is still an option for these businesses, the government department is anticipating that digital channels will eventually become the normal way for businesses to share their financial information.

The Making Tax Digital initiative first began with the introduction of real-time reporting of payroll data from businesses directly to HMRC. This allows employers access to an online business tax account on HMRC’s gov.uk pages, with live information about how much PAYE they’ve paid and are due to pay. The personalised online snapshot on gov.uk also contains information about the business’s tax obligations – including details about corporation tax, VAT and other taxes which are due.

The next stage of the initiative then required VAT registered business to report their VAT-related figures every quarter to HMRC. From April 2019 onwards, this has become the norm for businesses that sit within this category.

 

What are the limitations of bookkeeping software

The benefits of bookkeeping are wide-reaching and vast. However, like many digital systems, there are still certain accounting tasks that will require the expertise of a living, breathing human!

Even the cleverest computer software cannot replace the expertise of an experienced accountant. Despite all the 21^st century advanced in technology, It still takes a human conversation with a financial advisor or accountant to come up with a smart business plan or to develop a new business structure. The expertise of a trained professional provides a level of insight and understanding that simply isn’t possible to replicate with a computer.

In the world of financial reporting, even the tiniest of inaccuracies in the figures can result in a hefty fine or penalty. That’s why it’s always worth having a second pair of eyes to look over the books and ensure that all the information recorded is correct. Again, there’s no substitute for an accountant or financial advisor at this stage, ensuring that all the books are balanced before they are submitted.

 

The best of both worlds

The benefits of accounting software are varied and huge – and in many cases, the digital-first approach is a legal obligation, making it a must-have for organisations above the VAT threshold, for example.

However, it’s important to stress that software cannot work alone. The most effective approach for businesses is in fact a hybrid approach – combining the use of digital book-keeping software with the expertise of a trusted accountant or advisor.

The benefit of an accountant is that can find tax savings that software cannot, and can advise on things like selling your business, or how to maximise tax savings. They can also ensure that the business stays compliant and pays exactly the right amount of tax.

When it comings to growing the business, an accountant can offer strategic financial advice to help the business achieve its financial goals and maintain its health. And in a world where the tiniest of errors in a financial report can land a hefty penalty or fine, the engagement of an accountant is also a smart business move which will save money in the long run.

An Accounting Gem can offer you advice on the best software for your company, and the peace of mind of working with an experienced and friendly team of accountants who can look beyond the figures and offer help and guidance on any and all business accountancy matters.

You can reach us on 01473 744 700 or via email at contactus@aag-accountants.co.uk.

The Coronavirus Job Retention Scheme (CJRS), launched following strict nationwide lockdowns in response to the outbreak of coronavirus, managed to help one million employers protect the jobs and livelihoods of more than eight million workers.

Now, as the Government begins phase three of its plan to reopen the UK and get the economy moving again, businesses have the ability to start bringing back furloughed employees to work part time on a flexible basis.

Starting on the 1 July, employers have been able to bring back those employees who have been furloughed as part-time staff, whilst the government will pay for the hours that they don’t work on a continuing furlough basis. This move is designed to help businesses to reopen workplaces whilst maintaining social distancing, with the aim of getting employees back to work as quickly as possible.

Employers will have to pay staff for the hours that they are working, and contribute towards wage costs on an increasing scale, up to a maximum of 20% by October, whether the employees are working or not.

 

Important Points To Note

• Going forward, no new employees can be furloughed, apart from those returning from statutory parental leave.
• As of 1 July, there is no minimum furlough period, and employees can be brought back at any time to work part time as agreed between themselves and their employer.
• Employers are required to pay in full for the hours worked by furloughed employees but can continue to claim a furlough grant to cover the difference between the actual hours worked and an employee’s ‘usual hours’.
• From August, employers will be required to begin contributing towards the cost of furlough payments, up to a maximum of 20% in October. The Job Retention Scheme will end on 31 October 2020.

 

How Will ‘Flexible Furlough’ Work?

As of 1 July, employers can begin to bring any member of staff that is currently furloughed back into the workplace, for any amount of time and any shift pattern, claiming a CJRS grant for the hours not worked by the employee.

Employers are able to choose to continue to fully furlough some or all of their employees, or rotate employees on and off of furlough, so that everyone gets a chance to work and social distancing can be maintained.

If an employee is fully furloughed, they will not be able to do any work for an employer until they are moved to flexible furlough.

 

Who Is Eligible To Be Furloughed Under The New Scheme?

Employees must have been furloughed for at least three weeks before 30 June under the old scheme to be eligible to be furloughed under the new one from 1 July. The only exceptions to this rule are those returning to work from statutory parental leave, such as those returning to work after maternity leave, shared parental leave, adoption, paternity or parental bereavement leave.

You cannot furlough new employees now. The final date for new furloughs was 10 June.

All other eligibility criteria are the same, but you can check the government’s ‘Check which employees you can furlough’ guidance for more information.

 

How Long Can Employees Be Furloughed

The last date anyone could be added to the furlough scheme was 10 June, and if you furloughed any employee on that date, they will be able to move to the new scheme straight away.

For employees re-furloughed after 10 June, you will have to wait three weeks until you can move them onto the new scheme, even if this period ends after 1 July. A previously furloughed employee who started a new furlough period as of 15 June, for example, would then remain furloughed under the old scheme until 6 July.

Once employees have all been moved to the new scheme, they can be flexibly furloughed for any period up until 31 October 2020.

Whilst businesses are not able to furlough anyone new, they are able to re-furlough staff if they are forced to close again amidst any local lockdown.

On this subject, a spokesperson for the Prime Minister has said: “If employers have used the furlough scheme at any point between March 1 and June 30, which of course many will have, they can re-furlough those employees from July 1.

“If someone worked in non-essential retail and they have been able to go back to work and that non-essential retail now has to close again they will still be eligible to benefit from the furlough scheme.

“It applies nationwide but obviously it’s a particular circumstance to Leicester and those surrounding conurbations at the moment.”

 

How Many Employees Can You Furlough?

From 1 July you can only furlough as many employees as the maximum number of employees you had furloughed under the old scheme, although you don’t need to include returning parents in this calculation as they are exempt.

This may cause some problems for employers already working with rotating furlough patterns. If you had 100 employees, with two groups of 50 working on a rotating furlough basis, you are only eligible to have 50 employees flexibly furloughed at any one time. This means that you still cannot bring back your entire workforce for part time hours and will need to work out a way to keep your rotation going to take part in the scheme.

 

How To Calculate Flexible Furlough

It may be tricky for businesses to calculate the CJRS grant for employees on flexible furlough, due to the complex nature of shift patterns, hours worked and your required contribution increasing over time.

When an employee is working under the flexible furlough scheme, they can work as many hours as necessary, agreed between employer and employee. Employers must pay the employee’s normal wages in full (this must be the pre-furlough rate of pay) each month.

Employers can then claim a pro-rated furlough grant for the hours that the employee hasn’t worked, based on an employee’s ‘usual hours’ when they are not on furlough, minus the hours they actually worked.

For each claim period and for each employee, an employer must work out and submit:

• The employee’s usual working hours;
• The actual hours they worked
• Their furloughed hours.

Wages will be proportional to the hours not worked by the employee.

The government guidance document “Calculate how much you can claim”. Offers in-depth details on how to calculate the wages you need to pay and how much grant you can apply for. There is also a CJRS calculator, which has been updated to include flexible furlough calculations.

 

Help With Flexible Furlough

The new rules regarding furloughing can be difficult to interpret in some cases, so if you need help making sure you comply with the new rules then you can call the friendly team at An Accounting Gem

You can reach us on 01473 744 700 or by email at contactus@aag-accountants.co.ukfor a friendly discussion along with expert advice on this or any other accountancy topic.