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Can directors be furloughed under the Job Retention Scheme?

2020
30
MAR

That’s been a common question in the last week since a large proportion of businesses have had to close. But why?

Directors don't need to be assured that their job is safe.  It is safe.  It will be the last one to go if the business ceases to trade completely. 

Isn’t this the perfect time for business owners, whether sole trader, partner or director, to catch up on all those things that they never normally have time for?  It’s a time to talk with customers and suppliers, update the website, plan how the business will change going forward and put in place the things that need to be done to make those changes.  

As business owners we all wish we had more time as there are always a multitude of things to do and we can only do the most productive when things are busy.  I certainly have a long list of things I would like to have time to do and I am sure many others are the same.  All those things that you put on the back burner because they don't earn you anything.  Now is the time. It is the way to keep positive.  If you don’t keep your eye on the ball and keep managing your business how will you be ready when we come out of the other side of this situation?

I am sure every business owner would love to have a hand out from the Government in return for the taxes they pay but we are in business because we wanted to achieve something for ourselves and we have to take responsibility for how it trades and the money it makes.  We can’t rely on others to support us.  Directors take dividends because they make a profit in their business.  They have a successful business to make that profit and some of that profit should always be kept in reserve for difficult times or for investing in the business.  That time is now.  If you have taken all your profits for yourself then you should use what you have taken out and invest some back into the business to pay your staff and your suppliers if you need to.  You shouldn't expect the Government to pay your salary.

The Job Retention Scheme is very generous and will enable businesses to retain their staff until such time as they can trade again.  The businesses which will lose out will be those who decided that their staff should not be on a payroll.  Those staff may be able to claim if they were registered as self-employed and have submitted tax returns but how many people are being paid cash in hand?  No claim will be able to be made for them either by the employer or by the employee without declaring how much they have been paid in cash in the previous months and years.

The Job Retention Scheme is exactly what it says - an opportunity to retain your staff so that you can be up and running again as soon as your business is able to trade.  Staff are difficult to find and this ensures you keep the staff you have who know their job and can help you get back on track quickly.  And you won't have to pay to keep them unless you want to top up their salary from the 80% the Government will refund.  

This will be a tough time for everyone but Directors are the only ones who can be assured their job is safe, unless they don't spent this time planning for the future of their business.

Since writing this there has been some unofficial guidance which says that directors can furlough themselves as long as they are not doing income generating work but I have not found any official guidance as yet.  New information is being released daily so we can expect to find out more before the claim process is available.

 

 

 

Related Tags:  Business |  Director  |  Employer | 
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