A Guide to Furlough & the Job Retention Scheme

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Nicola Mullineux

Nicola Mullineux

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03 Mar 2021

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First published 31st March 2020. Last updated 3rd March 2021.

On 3 March 2021, it was announced that the Job Retention, or furlough, Scheme was to be extended to 30 September 2021. Below are some key FAQs concerning what we currently know about the extension.

We’ve opened our HR helplines to give employers affected by COVID-19 access to a free advice call. So, for fast answers to questions on furloughs, lay-offs and the Job Retention Scheme, speak to an expert today on 01455 858 132.

The Job Retention Scheme (JRS)

What is furlough leave and the Job Retention Scheme?

Its the government’s scheme that will pay most of an employee’s wages while they are on furlough leave. But what exactly is a ‘furloughed employee?’

Normally, an employee on furlough takes a period of temporary leave and receives no pay. They stay on your books, and you can bring them back in when you need them.

The furlough leave government announcement is called the Job Retention Scheme. And, if you need to furlough employees due to the COVID-19 crisis, the “no pay” element will be overridden and the government may cover a portion of your employees’ wages up to £2,500 per employee per month.

Why was the scheme extended?

Originally launched in March 2020, the furlough scheme was expected to end on 31 October 2020, to be replaced by a new scheme, the Job Support Scheme, from 1 November. As a result of a new national lockdown being put in place in England the furlough scheme was extended. 

On the 3rd March, a further extension to the scheme was announced. Now, the scheme is set to end on 30 September 2021. Whether further financial support will be offered to businesses beyond this date is currently unknown.

How does the extended scheme work?

Like before, you place staff on a period of ‘furlough’, meaning they do not work at all, or work less hours than usual, but are retained on your books. This is an alternative to making staff redundant.

The government then pays 80% of their wages, up to a cap of £2,500 per employee per month. You do not have to top up their wage, meaning that if an employee is placed on ‘full furlough’ and does no work for you, all you will need to pay is National Insurance and employer pension contributions.

This will change in July, where the government will only contribute 70% and you must make up the additional 10%. This changes again in August through to September, where your contribution will increase to 20% and the government contributes 60%.

Employees can work part-time whilst furloughed, otherwise known as ‘flexible furlough’, however you will need to pay them in full for the time they work.

How do I claim the grant?

When claiming the grant for furloughed hours, you will need to report and claim for a minimum period of 7 consecutive calendar days. As before, claims can be made through the government website.

Which companies are eligible to use the scheme?

All employers with a UK bank account and UK PAYE schemes can claim the grant. You will not need to have used the furlough scheme before.

Do I need to have furloughed employees before?

No. From November, employees can be furloughed for the first time provided they meet other eligibility criteria.

It is possible the government will introduce a restriction on putting new employees on furlough towards the end of the scheme. However, this has yet to be announced.

Which employees can be furloughed?

To be eligible to be claimed for currently, employees must be on your PAYE payroll by 23:59 30 October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30 October 2020.

However, as a result of the new extension, you may want to place others on furlough. From 1 May, you can furlough someone who was employed on 2 March 2021, as long as you have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021.

Furloughed workers can include agency workers, office holders (including company directors) and salaried members of Limited Liability Partnerships (LLPs).

Finally, from December, anyone serving a notice period for any reason cannot have furlough grant claimed for them.

Do employees need to agree to be furloughed?

Yes. In all cases, you should discuss the situation with employees and agree with them that you are designating them as a furloughed worker, either under full furlough or flexible furlough.

Can employees do any work during furlough?

Previous rules outlined that employees were prohibited from providing services to you, or an associated organisation, that generated revenue whilst furloughed. This means that, if furloughed employees are asked to conduct work, they need to be paid in full for it and the hours they work not included in any claim for the government grant.

These rules continue to apply, meaning that employees can obtain work with another employer when they are on furlough with you provided that their employment contract allows for it.

Can furloughed employees take annual leave?

Guidance has confirmed that annual leave will operate in the same way as under previous furlough rules. In other words, annual leave continues to accrue during furlough and that employees should be paid in full for their leave. This means that, should the old rules apply, you will need to top up holiday pay for furloughed workers by 20%.

Expert HR advice

The situation in the UK is changing fast, so keep checking the GOV.UK website for the latest guidance.

In the meantime, to get specialist advice on how to furlough employees and manage the impact of COVID-19 on your business, call our HR advice line for free on 01455 858 132.


Disclaimer: This blog was updated on the 03/03/2021. As the situation in the UK is developing rapidly, always remember to check in with your HR adviser or the gov.uk website for the latest updates.

About the Author

Nicola Mullineux

Nicola Mullineux, as Group Content Manager, leads a team of employment law content writers who produce guidance and commentary on employment law, case law and key HR developments. She has written articles for national publications for over 10 years and regularly helps to shape employment of the future by taking part in Government consultations on employment law change.

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Nicola Mullineux

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