How Will The Extended Furlough Scheme Work?

If you currently have furloughed staff and were relying on the Coronavirus Job Retention Scheme (CJRS) to cover your payroll costs, then the cancellation of the scheme and the introduction of a brand new Job Support Scheme will have raised a few eyebrows.

However, there’s good news. The CJRS, or furlough scheme, has now been extended until March 2021, as part of the Government’s ongoing Covid-19 financial support package.

But how will this impact your business and employees? And what’s happened to the previously mooted Job Support Scheme and Job Retention Bonus?

The ups and down of the furlough scheme

When lockdown first hit, we all suddenly had to learn a new payroll term – ‘furloughing’.

Furloughing gave businesses the option of paying staff to stay at home, while also allowing them to work some part-time hours if required. From its inception, the furlough scheme funded 80% of a furloughed employee’s salary, up to a ceiling of £2,500 – with the Government funding dropping by 10% each month from August onwards and employers being asked to start contributing the employer NI costs.

So, what’s happened to the scheme?

  • The end of the furlough scheme – towards the end of the first lockdown, Rishi Sunak, the UK Chancellor, announced that the furlough scheme would end on 31 October 2020.
  • Job Support Scheme (JSS) announced – in October 2020, the Chancellor announced that a brand-new Job Support Scheme (JSS) would start from 1 November. The JSS would offer far less financial support (only paying out two thirds of the employee’s salary) and this raised big worries in the business community around the viability of the JSS as a replacement to furlough.
  • Job Retention Bonus (JRB) announced – as a secondary incentive to keep employees on the payroll and avoid mass redundancies, the Government proposed a Job Retention Bonus, where qualifying businesses would be paid £1,000 for every previously furloughed employee that they kept on the payroll until 31 January 2021.
  • Furlough scheme extended – with local lockdowns increasing, and an England-wide lockdown about to come into force, the Chancellor needed to act fast. So, at the end of October he announced that the existing furlough scheme would be extended beyond October until 2 December – with the JSS taking over after this date.
  • Furlough scheme extended until March – then on 5 November, the Government made a further announcement, extending the furlough scheme until March 2021, and guaranteeing that the Government would cover 80% of an employee’s wages – as per the original incarnation of the scheme.
  • JSS and JBR both cancelled – as a result of this extension of the furlough scheme, both the JSS and the JBR have been effectively cancelled, ending months of speculation around how they would work, and whether they offered enough support.

Key points of the extended scheme

If you’re confused by all these changes, we don’t blame you! The ups and downs of the furlough scheme have had many finance professionals scratching their heads too. But the key takeaway is a very simple one – the furlough scheme’s back on, and it may well be the saviour of your cashflow over the coming months.

These are some of the key points to be aware of:

  • You can claim under the extended scheme if you’re already making use of the scheme.
  • You can also claim if you’ve not yet used the scheme – new claims are allowed.
  • The 80% funding is guaranteed until January 2021, when the scheme will be reviewed.
  • Employees can be ‘flexibly furloughed’, meaning that your staff can be part-working and part-furloughed, to add some flexibility to your resourcing.
  • Previously, your employees must have been included on a Real Time Information (RTI) return submitted on or before 19 March 2020. This cut-off date has now been extended to 30 October, so more of your existing staff may be eligible for the scheme.

The aim of the JSS was to support 'viable businesses' and this is likely to also be the main thinking behind the extension of the furlough scheme. By providing 80% of employee wages until March 2021, your business will be able to keep staff furloughed during any lockdowns, without the huge hit to your cashflow during these cash-poor times.

Talk to us about your payroll and furlough needs

The last quarter of 2020 and the first quarter of 2021 are likely to be highly challenging for UK businesses – so the extension of the furlough scheme does at least offer a glimmer of hope for smaller businesses with an eye on survival and recovery into the new year.

If you’d like to know more about the extension to the furlough scheme, how to make a claim, or how to set up your payroll correctly, please do contact us for some assistance.

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