Furlough Scheme Extension or Coronavirus Job Retention Scheme Extension

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While the spread of COVID-19 has been mostly under control, several high incidence areas remain on lockdown, with still plenty of businesses forced to shut down temporarily. That’s why the government announced the extension of the furlough scheme, also known as the Coronavirus Job Retention Scheme (CJRS), until December.

New Update was recently announced last March 3, 2021

Furlough is going to be extended till the end of September, and from the employees’ perspective, there will be no significant change. Furloughed employees will still receive 80% of their salary, which is the same amount they have been receiving since the second quarter of last year.

The only major change is that there will be a 10% contribution required from businesses as of July, which will slowly increase to 20% by August to September. There is going to be a gradual tapering of furlough from July onwards to get businesses to contribute. See more detailed updates on this UK Spring Budget 2021

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As part of the government’s plan for economic recovery amid this crisis, the Prime Minister announced last October 31 the extension of the furlough scheme as well as additional financial support to secure the livelihoods of the people. Furloughed employees will receive 80% of their salary for hours not worked, with a cap of £2,500. This reduces the cost shouldered by employers to retain their workers, making the extended CJRS more generous, especially with the coming winter.

Aside from the furlough scheme extension, businesses that are forced to shut down due to local lockdowns will receive up to £3,000 per month under the Local Restrictions Support Grant. Moreover, homeowners can breathe easier, knowing that the end of mortgage payment holidays has been delayed.

With the extension of the job retention scheme, the Job Support Scheme has been put on hold and will be introduced once the CJRS has ended.

How the Furlough Scheme Extension Works

Like the previous job retention scheme, businesses will be paid upfront to cover the furloughed employees’ wages. Employees will be paid 80% of their salary for the unworked hours, up to a maximum of £2,500, shouldered by the government. This reduces the cost of retaining employees for business owners, who now only need to cover the National Insurance Contributions (NICs) and pension contributions for hours not worked by their furloughed employees, aside from the wages of hours worked by their employees.

Under the extended CJRS, aside from full-time furlough, flexible furloughing is allowed giving business owners the option to have their employees work part-time to keep some vital job functions running.

Who are eligible of the furlough scheme extension?

Employers with a UK bank account and UK PAYE account are eligible for a grant regardless of whether they’ve used the previous CJRS or not. Publicly funded organizations are expected to not avail of the grant; however, partially public organizations whose private revenues are affected by business interruptions may be eligible.

Employees who are eligible for this extension must be under the employer’s PAYE payroll by 23:59 of October 30, 2020. This means they must be in the HMRC’s system, submitted via RTI payment notification, on or before October 30. They can be under any contract, and employers can agree to any working arrangements with employees.

What support is provided and employer’s costs and responsibilities?

Employers are responsible for paying the worked hours of their employees as stated in the employment contract, as well as the taxes and NICs due, and submitting a report to claim the furlough grant for the unworked hours. This is calculated in reference to the usual number of hours the employees work in a claim period.

When claiming for furloughed hours, the employer must report the number of hours worked by an employee versus the usual number of hours an employee is expected to work in a claim period. The minimum claim period is seven consecutive calendar days.

For the hours not worked by the employee, the government will pay 80% of the wages, with a cap of £2,500, and must be paid in full upfront. The government will announce shortly when claims can be made for November but confirm that there will be no gap in eligibility for support between the previously announced end-date of CJRS and this extension.

As with the previous CJRS, employers can choose to top up their employees’ wages at their own expense, aside from the grant, should they wish.

The furlough scheme has helped ensure job security for a lot of people and helped business owners keep up with the cost of retaining their employees amid business disruptions caused by the coronavirus. As the situation unfolds, the government will announce further steps and projects designed to address the needs of the people to ensure safety and job security.

About the Author

Annette Ferguson 

Owner of Annette & Co. - Chartered Accountants & Certified Profit First Professionals. Helping online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.