Furlough extension: What you need to know

Furlough extension: What you need to know

The furlough scheme has been extended until September 2021, including flexible furlough. Find out how the extension works and what you need to do as an employer.

This content was last updated 3 March 21.

The Coronavirus Job Retention Scheme (CJRS) will now remain open until September 2021. From 1 July the level of grant will reduce with employees receiving 70% per cent of their current salary for hours not worked, up to a maximum of £2187.50.

Businesses will still have the flexibility to bring furloughed employees back to work on a part-time basis or furlough them full-time. Employers will need to pay National Insurance contributions and employer pensions for all hours worked or unworked.

The Job Support Scheme will be introduced following the end of the CJRS.

Am I eligible for the furlough extension?

Neither you nor your employee needs to have previously claimed or have been claimed for under CJRS to make a claim under the extended CJRS (if other eligibility criteria are met). You can claim for employees who were employed and on their PAYE payroll on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 21, notifying a payment of earnings for that employee.

How do I claim?

The extended CJRS will operate as the previous scheme did, with businesses being able to claim either shortly before, during or after running payroll. 

Claims must be made by the 14th for the previous month. Find out how to check and claim for employee’s wages through the GOV.UK website.

Flexible furlough

What is flexible furlough?

Furloughed employees can return to the workplace on a part-time basis if they’re eligible. For example, you might be operating at a limited capacity and require your staff to work fewer shifts.

If an employee normally works five shifts a week, but you only need them two days a week, you can place them on furlough for the three remaining days. You would pay the employee’s wages and contributions as normal for the two days they work.

You will only be able to claim via the CJRS for employees’ wages for the periods where they haven’t worked.

How long can flexible furlough last?

Flexible furlough agreements can last any amount of time, however, the minimum period that employers can claim must be a minimum of seven calendar days.

How do I make a flexible furlough claim?

You will need to submit the following details to HMRC:

  • The usual hours an employee would be expected to work, based on the number of hours the employee was contracted for at the end of the last pay period.
  • The actual hours worked, or which will be worked.

Find out how to report employees’ wages to HMRC using the PAYE Real Time Information system when you’ve claimed wages through the CJRS.

Find out how to calculate claims for an employee who is flexibly furloughed

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It’s important to remember the following:

  • When claiming for unworked hours, employers will need to report and claim for a minimum period of seven calendar days, unless a claim is being made for the first or last few days in a month.
  • Claim periods must not overlap months.
  • The number of employees you can claim for in any claim period must not exceed the maximum number of employees you have previously claimed for through the CJRS.

If you’re unsure, SMART can help you with this.

Do I need to change my employee’s contract?

If you’re bringing back furloughed employees on reduced hours, you must agree to the new working patterns as a temporary variation of the contract, if the existing contract does not allow you to do so.

Agreements regarding work during furlough must be confirmed in writing under the terms of the CJRS rules.

What about the Job Retention Bonus?

It was announced when furlough was extended that a retention bonus would be redeployed closer to the time. More details about this are expected.

What if I can’t afford employer contributions?

Furloughed employees are entitled to receive 80 per cent of their wages, up to a cap of £2,500, until 1st July 21, this then drops to 70% with a cap of £2187.50, August 21 this drops again to 60% with a cap of £1875, this continues into September where the Furlough Grant is expected to end. Contributions from the employer are mandatory.

After September you may need to remove employees from the furlough scheme and consider alternatives, such as short-term working or redundancies.

Can I make an employee redundant whilst on furlough?

Yes. Redundancy pay must be calculated based on standard wages, not furloughed wages, and you can’t use the CJRS grant for redundancy payments or notice pay.

What are the alternatives to redundancy?

Redundancies are a difficult decision for any small business owner to make. Although redundancies will reduce your immediate employment costs, there are other factors to be aware of, such as:

  • Redundancy payments
  • Time spent following processes
  • The potential risk of unfair dismissal
  • Loss of skills
  • Costs of recruitment in the future

There are a number of redundancy alternatives you may wish to consider:

  • Redeployment: Moving an employee to other areas of the business where there is more demand, either temporarily or permanently.
  • Lay-offs: If it’s not viable to keep an employee on the furlough scheme due to contributions, or they aren’t eligible, you may want to discuss the option of unpaid leave.
  • Short-time working or reduced hours: If there is a temporary downturn of work, you might want to place employees on reduced hours outside of the furlough scheme and only pay for the hours they work.
  • Short-term or long-term pay reductions: Temporary or permanent pay cuts may be agreed upon by staff to avoid redundancies in certain circumstances. It’s important to ensure that this payment is not below the National Minimum Wage.

In all cases, you must have the employee’s written consent unless their existing employment contract allows you to make these changes.

If the period of short-time working or lay-off is over four weeks or more than six weeks in a 12-week period, employees have a statutory right to treat themselves as dismissed by reason of redundancy and are entitled to redundancy pay (unless the employer serves a counter-notice stating otherwise where certain conditions are met.)