What Does the Furlough Scheme Extention Mean? image

What Does the Furlough Scheme Extention Mean?

Staff Squared date icon17th November 2020

Tag iconSmall Business

Earlier on in the year, the UK government introduced the Job Retention Scheme (CJRS), better known as the Furlough Scheme, to support companies who were affected by Coronavirus by allowing them to stand down their staff while paying 80% of their salary worth up to £2,500 per month, with employers given the option to top up the remaining 20% so staff didn’t lose money. 

As COVID case figures started to drop, the government asked employers to contribute more towards their employee’s pay and it was announced that the Furlough Scheme would be due to come to an end on 31st October 2020.

COVID on the Rise

With cases of COVID beginning to increase again, the government initially announced a temporary extension of the Furlough Scheme until December following the news that the UK would enter a second 4-week lockdown in an effort to curb rising Coronavirus infections.

However, on 5th November, Chancellor Rishi Sunak announced that furloughed employees will receive up to 80% of their average earnings, worth up to £2,500 a month, until the end of March 2021.

What Does the Furlough Scheme Offer?

The furlough scheme offers grants to employers who furlough their staff rather than letting them go. The government will cover 80% of furloughed staff’s wages up to £2,500 per month.

Furloughed employees will continue to receive 80% of their salary until the end of the scheme (which is currently March 2021, although this may change as the scheme is reassessed). Employers may choose to top up their salaries by the extra 20%, but they are not obligated to do this.

What Isn’t Covered?

The government measures don’t help all workers in all circumstances. The main groups of people likely to miss out on the extended scheme include:

  • Anyone not in employed work on 30 October 2020.
  • Those who earn a low basic salary that’s usually topped up with non-compulsory commission.
  • People with payday loan payment obligations that had been based on their full salary and who are not being given any payment reprieve.
  • Limited company directors who earn a significant amount of their salary through dividends.*

*Company directors are usually considered as self-employed. However, for the purposes of the furlough scheme, directors are considered to be an employee of their company. This means that they may be eligible for furlough, providing that they meet the eligibility criteria. 

As most directors in this position will usually keep their salaried pay as low as possible and top up their income with dividends, this is likely to mean they’ll receive very little from the government scheme as dividend income is not included and the 80% payments only cover their regular pay.

Directors will only be allowed to carry out statutory directional duties, such as filing documents on Companies House. Any other form of work – even the maintenance of social media accounts, such as tweeting responses to customers or updating company profiles – is not allowed.

Who is Eligible for Being Furloughed?

All employed staff are eligible for furloughing, as long as they were on their employer’s PAYE payroll on 30 October 2020. You do not need to have been furloughed previously to be eligible and can be on any type of contract, including zero-hours, fixed-term or temporary contract.

NB: The furlough scheme does not apply to you if you are self-employed. However, you might qualify for support under the Self-Employed Income Support Scheme (SEISS).

I have More than One Job – How Will this Affect Me?

If you are employed by two different companies, you will be eligible for furlough with both employers separately. It is also completely possible for you to be furloughed from your normal employer and continue to work for a second employer during this time.

Can I be Furloughed if I’m Currently on Sick Leave?

If you’ve not already been furloughed but are off work and are receiving (or could receive) SSP, you can’t be furloughed until that period of absence has ended.

However, if you become sick while on furlough, it’s up to your employer as to whether they keep you furloughed or whether to end furlough leave and put you on sick leave.

How Will I be Paid if I am Being Furloughed?

If you have been placed on furlough by your employer, you will still be paid through PAYE as normal. This means that your furlough pay with be subject to income tax and Nation Insurance contributions which will be taken automatically.

How is Furlough Pay Worked Out?

When your employer applies for the furlough scheme, they should include:

  • Regular wages.
  • Overtime already worked.
  • Non-discretionary fees.
  • Compulsory commission payments.
  • Piece-rate payments.

What cannot be included:

  • Payments made at the discretion of the employer or a client, including payments such as tips.
  • Discretionary bonuses.
  • Discretionary commission payments.
  • Non-cash payments.
  • Non-monetary benefits, such as benefits in kind (i.e. company car) and salary sacrifice schemes (including pension contributions) that reduces an employees’ taxable pay.

The 80% salary calculation will be worked out differently depending on the way you’re paid.

If you are paid a fixed full or part-time salary, furlough pay is based on what was earned during the last paid period.

Your employer will take what you were paid in the last pay period, divide it by the total number of days in that pay period, multiply by the number of days in the furlough pay period and multiply by it 80%. This works a little differently for those who started their job recently, as well as for those on zero-hours contracts, or other workers whose pay varies month to month.

Further information on the extended furlough scheme can be found at Gov.uk.

Written by Clarisse Levitan

Marketing and Customer Relations Advisor - Staff Squared 

Clarisse works as the Lead of our Customer Care Team to provide our customers with the very best care and guidance when using their HR software and is responsible for our day-to-day marketing activities and strategies.

More from our blog

Pay only for what your business needs

  • £

    3

    per person

    per month

  • Try Staff Squared HR FREE for 14 days. No credit card required.

How can we help?

Staff Squared Logomark Close icon

Let's get your HR started.

Tick FREE for 14 days
Tick No credit card required
Close cross
Enter your email address

Already have an account? Log in

Need help?