5 things you need to know about furlough ending and how it affects your finances
MILLIONS of Brits have been on furlough at some point this year as the Coronavirus pandemic has waged war on jobs and businesses – but the scheme is coming to an end on Sunday
Workers who still can't return full-time are set to be moved on to the government's new Job Support Scheme, where their income will drop to or, worse still, made redundant.
These changes mean lots of people will be worrying about their income.
"The winter months are always more challenging, with Christmas to pay for and higher energy bills,” says Rebekah Tapping, group HR director of employee benefits company Personal Group.
“But this year may become unmanageable for workers who have spent much of the year on 80% pay and now have more financial security blankets being taken away”.
Here are five things you need to know about the end of furlough, and how it could affect your finances.
How the Job Support Scheme works
If your company can’t bring you back full-time yet, you could be put on the Job Support Scheme.
This can be used by all small and medium-sized businesses, as well as larger ones which are making less money because of the pandemic.
The Job Support Scheme will start as soon as furlough ends on November 1, and it will run for six months until 31 April 2021 – though the government has said it will review it in January.
If you are able to work at least 20% of your normal hours, your employer will pay you for 5% of the hours you don't work, up to £125 a month.
The government will then stump up 62% of your pay for non-worked hours, up to a maximum of £1,542. Added to your pay for the one day a week you do work, this means you should get 73% of your usual wage.
But if your workplace has been forced to close because the place where you live has entered tier three lockdown, the rules are different.
Then, the government will pay 67% of your wages and your employer won't contribute anything.
As with the furlough scheme, you don’t have to apply – your employer will register you.
Your company also has to keep paying National Insurance and pension contributions.
What your redundancy rights are
There are fears of a ‘job loss bloodbath’ when the furlough scheme comes to an end, as companies lay off staff they can no longer afford to keep on.
If you have worked in your job for more than two years, you should get a statutory redundancy payment – but how much you get depends on a number of factors.
“How much you will receive is dependent on factors such as your age, how long you have been working, your weekly wage and how much an employer is willing to offer above the legal minimum Statutory Redundancy Pay,” says Salman Haqqi, personal finance expert at money.co.uk.
If you are worried that your employer is unable to pay you this, you can claim some of the cash from the National Insurance Fund using the Redundancy Payments Service website.
Bu you do need to request the money from your employer first.
Here are seven things you need to check if you're being made redundant.
You might be eligible for support grants
If your earnings have dropped, you might be able to get a grant that you won’t have to pay back – for example from your local council, a charity or even your energy company.
“Before you go to a credit union or ask your friends or family for cash, find out if you are eligible for a grant,” says Liam Evans from financial hardship charity Turn2Us.
The charity has a database of grants on its website.
If you have fallen behind on your utility bills, you might be able to get payment help from your gas or electricity company.
“Energy suppliers have grant funds which they pay out thousands of times a year,” says Evans.
“If you have been a good customer in the past but you have found yourself with a few months of energy debt as a result of the pandemic, it might be worth contacting your supplier.”
It is also worth getting in touch with your local council.
They might offer crisis loans, give you money off your council tax bill or help with childcare costs like school uniforms and free school meals.
“There are lots of these schemes, but you will only know about them if you reach out to the council,” says Evans.
If you’re still in work, your company might be able to offer some help, too.
“Some companies offer 24/7 helplines for employees to get access to confidential advice and support, including debt advice,” says Tapping.
“Others offer staff access to fair value loans, cost-effective insurance plans and discounts on groceries.”
Check you're getting the right benefits
Whether you have been made redundant or put on the Job Support Scheme, you might be able to claim benefits such as Income Support, Housing Benefit or Universal Credit.
“Work out what benefits you are entitled to,” says Evans. “More than £18bn of benefits go unclaimed every year because people don’t know what they can get”.
Turn2Us has a benefit calculator on its website – it takes about 10 minutes to fill out and Evans says some people who have used it have found that they can get an extra £5,000 each year.
The calculator will also tell you if you are better off claiming tax credits or being on Universal Credit.
“Once you make the switch to Universal Credit, you can’t go back – so make sure you are not worse off,” Evans advises.
If you are a Universal Credit claimant, you can’t be sanctioned for being made redundant – even if you took voluntary redundancy.
But if you receive a redundancy payment, including pay in lieu of notice, pay for unused holiday or a lump sum for taking voluntary redundancy, this might affect your benefits because the money will be counted as savings.
If you have more than £6,000 in savings the amount of Universal Credit cash you can claim starts to fall, and if you have £16,000 or more you usually can’t claim anything.
How to tackle your debts
Since the start of the pandemic, banks have had to offer payment holidays for mortgages, loans and credit card payments by law.
More than 4 million people have taken advantage, but the scheme comes to an end on 31 October.
Lots of banks will also stop interest holidays on arranged overdrafts at this time.
Haqqi says that banks will now “offer tailored support for their customers and their particular circumstances on a case by case basis” – so it is worth getting in touch and discussing your options.
But beware that if you do take up extra help from November 1 it could affect your credit score.
If you have fallen behind on a few different bills, work out which ones are the highest priority to pay back.
Charities like Citizens Advice and StepChange can help you with this free of charge.
You may consider moving previous credit card debt to a 0% balance transfer card as a way of managing your debts.
You need to make sure you can pay it off before the 0% period ends and that you will be accepted for the card.
Use an eligibility checker, eg, MoneySavingExpert's that won't damage your credit score.
“It is important to be sure that you can afford to pay off your balance within the interest free period, or you will be charged interest after the 0% interest period ends,” Haqqi adds.
If you are considering drastic options like filing for bankruptcy or taking out a debt relief order, try and get some advice first as these will be listed on a public website and will have an impact on your credit rating.
“Things like bankruptcy or debt relief orders can have long-term implications, so seek advice before you go for those options,” says Evans.
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