Furlough tips: How to deal with a reduced income – top tips

The outbreak of coronavirus has led to countries around the world being placed on lockdown – bringing some businesses to a halt and thousands of workers facing uncertainty. The Government has given a lifeline to businesses during the lockdown, with a pledge to pay 80 percent of employees’ wages.

What is furlough?

Should a company be unable to operate during the pandemic, or there is no work for staff during this time, employees can be placed on furlough.

This is a job-saving scheme, as workers remain on the payroll and are not made redundant.

Employers then can access support through the Coronavirus Job Retention Scheme which makes sure 80 percent of wages are paid to staff, in order to avoid redundancies.

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Any workers on the company’s PAYE payroll before February 28 can be put on furlough.

Under the Government scheme, workers will be paid 80 percent of their wages, up to £2,500 a month, and continue to pay tax on their income.

If you are facing a reduced income due to coronavirus, here are some tips.

Debt charity step change has put together a step by step guide for those who have been placed on furlough or have had their income reduced.

There are several ways coronavirus may have affected your financial situation. These include:

  • Being furloughed
  • Working reduced hours
  • Being unable to work due to illness
  • Taking time off to care for a loved one
  • Being made redundant

How to handle a reduced income

1. Check you are being paid correctly each month

If you have been furloughed, made redundant or cannot work due to illness there is help available.

Check whether you are on the right benefits or payment for your situation, such as Statutory Sick Pay, Universal Credit or more.

For more information visit the Government’s website here.

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2. If you have debts, there are options available to ease the burden during this time of uncertainty.

The Financial Conduct Authority (FCA) has announced plans to require creditors to offer further support to those with overdrafts, loans and credit cards.

This includes

  • Interest-free overdrafts of up to £500 for up to three months
  • Payment holidays on loans, credit cards, store cards and catalogue accounts for up to three months
  • Changes to the new overdraft rules introducing a flat rate of interest on all overdrafts to make sure nobody is worse off as a result of the changes
  • Ensuring customer credit ratings won’t be affected if they use a payment holiday or an interest-free overdraft
  • Your creditors may also be able to:
  • Reduce or delay your mortgage payments
  • Reduce or delay your rent payments
  • Reduce or delay your unsecured loan repayments
  • Allow you to access your savings early
  • Offer you more credit
  • Reduce or pause your energy bills
  • Reassess your energy arrears

Get in touch with your creditors and discuss your situation to see what support is available.


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3. Reach out for emergency help if you need it

If you are facing an urgent cash crisis, delay to benefits or any kind of upheaval which has left you short of money there are options.

This can be via food banks, your local council or charities.

For more information, visit StepChange’s website on emergency funding here.

4. Organise your debts

Go through the payments you make each month and the debts you owe and figure out what you need to focus on first.

This may seem like a scary and time-consuming process, but it will be worth it in the end.

There are lots of types of debt, and lots of different types of creditor.

Some bills are classed as priorities because the consequences of not paying them are greater than the consequences of not paying others.

For information on which bills to pay first, find out more here.https://www.stepchange.org/debt-info/dealing-with-debt-problems/what-debts-to-pay-first.aspx

5. Make a list of incomings and outgoings

Seeing all of your finances in black and white can make the situation easier to process.

Income – add up everything which you receive each month. This includes any wages, benefits, pensions.

Outgoings – Go through your bank balance and look at where your money is going each month. This could give you an indication of a subscription or membership you may not need, saving you some money.

6. Put a budget in place – and stick to it

Here are some steps to follow when making a budget

  1. Calculate expenses. Your first order of business is finding out exactly how much you’re spending each month
  2. Determine your income
  3. Set savings and debt payoff goals
  4. Record spending and track progress
  5. Be realistic

7. Work out how to save money

By going through your outgoings, this could flag a gym membership, music service or more which you no longer need.

Cancelling this could free up some much-needed funds.

Other money-saving tips could be

  • Plan meals for the week
  • Use up items – like toiletries – before buying new ones
  • Switch off electric appliances at night
  • Use a comparison site to see if you can get cheaper household bills each month

Try and use appliances like washing machines and dishwashers less, these use both electricity and water and lessening your usage could save money in the long run.

8. Don’t be afraid to get help with your debt

Reach out to a charity which can help advise you on how best to manage your debt.

Having someone objectively look at your finances can provide perspective and offer a new solution to what seems like a mammoth problem.

There are options for this, including the Money Advice Service, StepChange.org and more.

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