We were hoping to have received a Treasury update by now with regard to the current period of lockdown, school closures and further assistance to business.
The stark reality of the situation is that, in the absence of Government support for business, People Group can no longer afford to keep incurring unrecoverable costs associated with the furlough scheme when we are generating no income. Therefore, we will not be utilising the scheme during this current period of lockdown.
If the scheme changes and these costs are covered by Government then we will of course alter our position and provide whatever help we can.
The present position is that Employers are required to incur unrecoverable employment costs (up to 17.3% of gross pay) for Employees who are placed on furlough: Employers NI contributions, Employers Pension and the Apprenticeship levy charges. These are actual out of pocket costs that Employers have to pay to HMRC and which they will not recover under the current scheme. Prior to 01 August 2020 these costs (other than the Apprenticeship levy fees) were met by the scheme.
In addition to these unrecoverable costs, People Group continue to pay other normal business overheads for internal Staff, rent, rates, insurances etc. all at a time when income has been drastically reduced by 70%.
At considerable cost to People Group, we have supported our Contractor Employees throughout 2020. We have processed and paid approximately 62,000 furlough pay slips amounting to nearly £10M of gross pay to our contractors. Incurring unrecoverable Employment costs of approximately £200,000 in doing this. Additionally we have paid out £123,000 of unrecoverable SSP payments.
We understand that this is not welcome news, it is not a decision we have reached lightly, however we cannot continue to incur these unrecoverable costs on a weekly basis and therefore have no alternative.
If schools continue to pay for their temporary staff then your payments will continue.
We are in close contact with our agencies, and industry bodies who are lobbying government and will update you if the situation changes in any way.
Terry Hillier, CEO People Group.