Extension of furlough scheme to end of September 2021

3rd March 2021

Numerous extensions have been made to the furlough scheme which was due to end on 30 April 2021. The Budget announcement about the extension itself was not a surprise but the length of the extension is. Most commentators were expecting an extension to the end of June 2021. For months, many leading organisations such as the CBI, TUC, CIPD and British Chamber of Commerce have asked for the furlough scheme to be extended and the length of the extension requested varied from a few months or to the end of the year. The Budget confirmation that the furlough scheme will be extended to 30 September 2021 will provide some certainty for many employers and their staff. However, for some sectors, such as hospitality and retail, the extension may still not be enough to prevent job losses.

Furlough scheme extended

The Government’s contribution to employees’ wages remains at 80% for hours not worked up to a cap of £2,500 a month but only to the end of June 2021. Employers will be required to contribute to wages for hours not worked, specifically, 10% from July 2021 and 20% in August and September 2021.

From a scheme that was first announced in March 2020 to be only a temporary measure, lasting for three months initially, it will be in place for around 18 months by the time it ends.

Announcing the extension, the Chancellor said that “There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”

However, the Budget announcement has not been the only recent development in relation to the furlough scheme.

There has been longstanding concern about furlough fraud. HMRC says that over 1,900 reports have been made to its fraud hotline and the first arrests for furlough fraud have already been made. Furlough fraud is described by Protect, the whistleblowing charity previously known as Public Concern at Work, as the fastest emerging issue it has dealt with in its history. Key fraudulent activity includes organisations telling furloughed staff to continue to work or claiming for working members of staff without their knowledge.

There have been two recent developments to increase transparency and to deter fraudulent claims. Firstly, employers’ furlough claim information, for claim periods starting on or after 1 December 2020, is now made public and published by HMRC.

Initially, a list of employer names were published (on 26 January 2021) but on 25 February 2021, HMRC published employer names, company number and the value of the claim within a banded range (there are 14 bands). The information will be published monthly. Claim details will not be published where employers are able to provide evidence to HMRC that publishing would result in a serious risk of violence or intimidation. That evidence could include a police incident number if the employer has been threatened or attacked or documentary evidence of a threat or attack, such as photographs. Secondly, HMRC has improved the information available to furloughed employees by including details of claims made for them in their Personal Tax Account for claim periods starting on or after 1 December 2020.

On 5 January 2021, updated Government Guidance was published. It confirmed that employers can furlough employees if they are unable to work or are working reduced hours because of caring responsibilities due to COVID-19. Caring responsibilities include caring for children who are at home because of the closure of schools or childcare facilities and caring for a vulnerable individual in the household.

Key points

Extensive Guidance about the furlough scheme and the various extensions have been published and links to some of the Guidance are at the end of this article. Most of the provisions of the extended furlough scheme are unchanged and the key points to note are as follows:

  • The furlough scheme is extended to 30 September 2021 and continues to apply across the UK. Flexible furlough is permitted and employers can furlough employees for any amount of time and any work pattern.
  • The Government will continue to pay employees 80% of their salary for hours not worked, up to a maximum of £2,500 a month to the end of June 2021. Employers will be required to contribute to wages for hours not worked, specifically, 10% from July 2021 and 20% in August and September 2021.
  • Employers cannot claim for furlough pay for individuals serving notice periods between 1 December 2020 and 30 April 2021 and this includes contractual and statutory notice periods. This provision covers notice periods as a result of retirement or resignation, not just redundancies. Notice pay must be at 100% of pre-furlough pay. A new Treasury Direction in due course will extend the date to 30 September 2021.
  • All employers with a UK bank account and UK PAYE schemes can claim the grant. Employers need to fund NICs and pension contributions.
  • An employer can currently claim for employees who were employed and on their PAYE payroll on 30 October 2020 provided they have made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where an employer has re-employed an employee after 23 September 2020.
  • Note that for claim 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 made an RTI submission to HMRC between 20 March 2020 and 2 March 2021. Significantly, this means that those who could not be furloughed because they were not employed before 31 October 2020 under the previous rules can now be furloughed from May onwards as long as they were employed by 2 March.
  • Employees that were employed, and on the payroll on 23 September 2020 who were made redundant or stopped working afterwards can be re-employed and claimed for. However, there are significant legal and practical implications of re-hiring (as well as cost implications) and employers should obtain legal advice before making any decision to re-hire.
  • Where consistent with employment law, any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of making a claim. Only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a claim. Updated Guidance reiterates that the agreement must be consistent with employment, equality and discrimination laws and employers should keep a written record of the agreement for five years.
  • Claims for furlough days in February 2021 must be made by 15 March 2021.

What about the Job Support Scheme and the Job Retention Scheme Bonus?

The Job Support Scheme (the replacement for the furlough scheme) was postponed back in November 2020 because of the extension of the furlough scheme at that time. The Job Support Scheme and its extension for closed businesses remain postponed.

The Job Retention Scheme Bonus was based on employers keeping on staff continuously to the end of January 2021. As the extended furlough scheme was in place at that time, the policy objective of staff retention fell away. Although the Government announced back in November 2020 that a new retention incentive would be deployed at another time, there has been no further information about this at all.


Unsurprisingly, most of the provisions of the extended furlough scheme are unchanged. After all, this is an extension of the existing scheme rather than a new scheme. Consequently, while employees are furloughed, they cannot do any work for their employer that makes money or provides services for the organisation or associated organisation but they can take part in training or volunteering. Similarly, employees retain their employment rights such as the right to annual leave, family friendly rights, redundancy payments and the right not to be unfairly dismissed.

See our previous articles about the furlough scheme and flexible furlough.

Finally, in relation to TUPE, for claim periods after 1 November 2020, a new employer is eligible to claim in respect of the employees of a previous business transferred if the TUPE or PAYE business succession rules apply to the change in ownership. The employees being claimed for should have been employed by their prior employer on or before 30 October 2020 and transferred from them to their new employer on or after 1 September 2020.

Contact our employment team if you have need any legal advice about furlough.

This article was first published on 5 November 2020, and last updated on 3 March 2021 to take account of the Budget announcement by the Chancellor of the Exchequer that the furlough scheme is extended to 30 September 2021.

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