Everything you need to know about the extended furlough scheme
With the furlough scheme now extended due to England entering another national lockdown Joanna Chatterton and Imogen Jain of Fox Williams LLP explain the similarities and differences when compared with the government’s original furlough scheme
As England follows Wales and Scotland and moves into a second period of lockdown the financial strain on many businesses, especially in the hospitality and travel sector, will once again be felt as they are asked to close by the government.
In what is being dubbed a “lessons-learnt lockdown” the government immediately, when setting out the tighter restrictions, announced that the furlough scheme due to end on 31 October 2020 was being extended.
When the furlough scheme extension comes to an end at the end of March, the Job Support Scheme (in which one third of the shortfall in the salary for employees who have returned to work on reduced hours is covered by the government and another third is covered by the employer) will launch on the same basis as originally planned. The guidance suggests that businesses will be able to claim under the Job Support Scheme even for employees who have not previously been placed on furlough.
Support for employees and employers
In recognition of the tighter restrictions being imposed once again, from 1 November 2020 for employees on full furlough the government will again pay 80% of an employee’s wages up to a cap of £2,500 for employees who are furloughed and employers will only be required to pay employer national insurance contributions (NICs) and pensions contributions for the hours the employee does not work.
The extended scheme is on par with what was offered in March and so reduces the cost to employers of furlough compared to the scheme in place in October.
Employers who were previously eligible to place employees on furlough can do so again. However, this time some publicly funded organisations may also claim on the scheme if they can show disruption to their private revenues.
As before, employees on any type of contract can be eligible to be placed on furlough. But they will only be eligible to be placed on furlough if they were on the employer’s PAYE payroll before midnight on 30 October 2020 and a “Real Time Information” submission notifying payment for that employee to HMRC must have been made on or before 30 October.
Employees do not need to have been put on furlough previously. If employees have been informed that they will be made redundant after 30 October (but were still on the PAYE payroll before midnight on 30 October 2020) then there is the possibility they could be rehired and placed on furlough as long as they meet the other criteria.
Whereas in March employees needed to stop working for three consecutive weeks in order to be eligible for furlough, there is no such requirement in the extended furlough scheme.
“Flexi-furlough” will continue to be available, meaning that employees can work part-time and their employers can claim a furlough grant for their remaining unworked hours, calculated by reference to their usual hours worked. If an employee works during the furlough period on a part-time basis, then for any time worked they will be paid by their employer subject to their employment contract and their employer will be responsible for paying the tax and NICs on those amounts.
New rules prohibiting essential travel and no overnight stays will place further financial pressures on travel businesses already under significant financial strain.
The new scheme will hopefully provide some support businesses in those industries but also gives flexibility if, in the run up to December and the Christmas period, additional staff are needed but on a more flexible basis.
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