Sarah Hayes, Emma Ship and Tabytha Cunningham | 3rd March 2021

The Extended Furlough Scheme – Updated as of 3 March 2021

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Sarah Hayes, Emma Ship and Tabytha Cunningham | 3rd March 2021

The Extended Furlough Scheme – Updated as of 3 March 2021


On 3 March 2021 the government announced that the Extended Furlough Scheme is now being extended again until 30 September 2021.

This update seeks to provide clarity on the consequences of the Extended Furlough Scheme and any differences it holds to the previous furlough scheme.

Update to the Extended Furlough Scheme as at 3 March 2021

On 5 November 2020 it was confirmed that the Coronavirus Job Retention Scheme (also known as the Furlough Scheme) had been extended from 1 November 2020 until the end of March 2021. On 17 December 2020 it was announced that the extension will now continue until the end of April 2021. On 3 March 2021, it was confirmed that this will be further extended until 30 September 2021. This means that, when it concludes, the Scheme will have been in place for over a full calendar year. The government guidance was updated to reflect this increase.

What payments will employees receive?

The government have confirmed that they will be contributing 80% towards employees’ usual salaries for hours not worked, up to a maximum of £2,500 per month until the end of June 2021. Employer contributions will continue as they have been under the extended scheme. This means that for hours not worked by their employee, employers will be asked to cover employer National Insurance and pension contributions. The criteria for the scheme remains largely unchanged.

From July 2021 the government will start paying less towards those employees on furlough. They will reduce contributions from 80% up to a cap of £2500 to lower percentages. However importantly employees throughout this time must still receive 80% of their wages up to £2500, for furlough to be valid. In summary:

  • From 1 July 2021: The government will pay 70% of wages up to a cap of £2,187.50. The employer will continue to pay employer’s national insurance contributions and pension contributions. However the employer will also have to pay 10% of wages to make up the 80% total up to a cap of £2,500.
  • From 1 August 2021: The government will pay 60% of wages up to a cap of £1,875. The employer will continue to pay employer’s national insurance contributions and pension contributions. However the employer will also have to pay an additional 20% to top up the 80% total up to a cap of £2,500.

The scheme will close on 30 September 2021 and employers will need to bear all employee costs again. Employers will therefore need to reconcile these extra amounts into the budget for their business and also evaluate the likely need for these employees after 30 September 2021.

Who is eligible to be furloughed?

The guidance confirms that employers do not need to have used the furlough scheme previously and employers across the UK can claim, whether their businesses are open or closed. Employees do not need to have been furloughed under the furlough scheme previously to be eligible.

From 1 November 2020, there is no limit on the number of employees that can be placed onto furlough. In addition, there is no minimum timeframe that an employee must be on the furlough scheme to be eligible, although the minimum claim period is one full week, or 7 calendar days.

For periods ending on or before 30 April 2021, employers can claim for employees who were employed on 30 October 2020, as long as they have made a PAYE Real Time Information submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

For periods starting on or after 1 May 2021 employers can claim for employees who were employed on 2 March 2021, as long as they have already made a PAYE Real Time Information submission between 20 March 2020 and 2 March 2021.

The employer must confirm in writing to the employee that they have been furloughed, and keep a written record for five years. If you require any assistance in putting documentation in place, please contact us.

How are the payments calculated?

This depends on whether the employee is being fully furloughed (i.e. is not working at all) or whether they are being flexibly furloughed. It also depends on whether they have fixed wages, or variable pay.

If an employee has fixed wages, and was eligible for furlough under the original scheme, the calculation is based on the wages payable to the employee in their last pay period on or before 19 March 2020. This applies, irrespective of whether the individual was actually placed onto furlough leave.

For all other employees on fixed wages who were on your payroll on 30 October 2020, the employee’s reference period will be their last pay period ending on or before 30 October 2020. These employees were only eligible for periods starting on or after 1 November 2020.

Employees who were first reported on your payroll between 31 October 2020 and 2 March 2021 can be furloughed from 1 May 2021. Details of how you should calculate these employees’ wages will be provided in updated guidance in due course.

If an employee has variable pay, the calculation of their “usual wages” will depend on whether they were eligible for furlough under the previous scheme. The government has created an online calculator to assist with these calculations.

Can employees still be placed on flexible furlough?

Flexible furloughing will continue to apply to the Extended Furlough Scheme, meaning that businesses will have flexibility to use the Scheme for employees for any shift pattern, including furloughing employees full time. This means that employers can consider rotating employees between furlough leave and working.

Will employees still be accruing holiday whilst on furlough leave?

Yes, the guidance confirms that furloughed employees continue to accrue leave as per their employment contract.

Employees can take holiday whilst on furlough. If an employee is flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours.

Can employees that are shielding be placed onto furlough leave?

The guidance confirms that an employee can be furloughed if they are shielding in line with public health guidance (or need to stay at home with someone who is shielding).

How will employers claim under the extended furlough scheme?

The extended furlough scheme will operate in the same way as the previous furlough scheme in respect of claiming payments. Businesses will be able to claim either shortly before, during or after running payroll.

On 10 November 2020, it was announced that from December 2020, HMRC will publish employer names for companies and Limited Liability Partnerships, the company registration number of those who have made claims under the scheme for the month of December onwards. The fourth Treasury Direction has confirmed that this publication will also give a reasonable indication of the amount claimed. An exception may be made to this where employers can show that the publication would expose their workforce to “serious risk of violence and intimidation”.

Can employers claim for an employee’s salary whilst working their notice period?

After an update announced on 13 November 2020, employers will no longer be able to claim under the scheme for a furloughed employee who is serving statutory or contractual notice.

The Fifth Treasury Direction confirms that claims cannot be made in respect of notice between 1 December 2020 and 30 April 2021.

The employer guidance also now states that:

For claim periods starting on or after 1 December 2020, you cannot claim for any days on or after 1 December 2020 during which the furloughed employee was serving a contractual or statutory notice period for the employer (this includes people serving notice of retirement or resignation)”.

We expect this will be extended to apply the same during the extended furlough scheme from 30 April 2021 until it ends on 30 September 2021.

If you have any questions about the Furlough Scheme or would like any assistance preparing any extended furlough documentation, please get in touch with a member of the Employment team.

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