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father and son playing with toys during his furlough scheme

Everything you need to know about the furlough scheme

The Coronavirus pandemic has brought with it a whole new vocabulary. Terms such as ‘lockdown’, ‘self-isolating’, ‘key workers’ and ‘WFH’ have become commonplace. Just a year ago, they would’ve had us all scratching our heads. Another one is ‘furlough scheme’.

Meaning ‘leave of absence’, the word ‘furlough’ has been around for centuries but has gained real prominence in 2020 with the introduction of the furlough scheme. Here’s all you need to know about it. 

What is the furlough scheme?

The Coronavirus Jobs Retention Scheme—or the furlough scheme, as it’s more commonly known—was introduced in March at the start of the first lockdown. Its aim? To prevent wide-scale job losses by subsidising the wages of workers who could no longer do their jobs because of the pandemic—either because their workplace was closed, or there wasn’t enough work. 

Employers who were furloughed were entitled to 80% of their pay, up to a maximum of £2,500 per month. Since the scheme was introduced, around 10 million jobs have been claimed for. And at the end of October, some 2 million people were on furlough.

What’s happening to the furlough scheme? 

It’s continuing. The scheme was to end on 31 October and be replaced by the Job Support Scheme. But with the rise in cases of Covid across the UK, the government announced a 4-week lockdown beginning 5 November. This resulted in the closure of pubs, restaurants, gyms and non-essential shops. To compensate for the continued impact on jobs, the furlough scheme has been extended until the end of March. The government will review it again in January. 

What does it mean for employees? 

Any employee on the PAYE payroll on 30 October can benefit from the furlough scheme. Equally, workers on the payroll on 23 September (the day before the Job Support Scheme announcement) who lost their jobs can be re-employed and make a claim. It doesn’t matter what type of contract it is—full-time, part-time, agency, flexible or zero-hour contracts are all included. Employees can also take on other jobs while on leave, so long as it doesn’t break the rules of their existing contract. 

There’s also a relief for self-employed workers affected by the pandemic. They’ll be given a single instalment grant covering 80% of profits for November, December and January, up to a limit of £7,500. Applications will be open from 30 November. A further grant will be available from the start of February to the end of April 2021, with terms to be confirmed nearer the time.  

What about employers? 

The scheme is more generous for employers than it was previously. Before, companies were required to top up furloughed wages by 20%, with the government paying 60%. Now, all 80% will be paid by the state. Employers will just need to cover pension and insurance contributions.

There’s also an incentive for employers to keep employees on the books—especially young workers. £1,000 will be given for every furloughed worker kept on at least till the end of January. Employers will get £1,500 for each 16-24 year old who’s given a 6-month work placement. And for every apprentice under 25 hired till the end of January, £2,000 will be given out (£1,500 for over 25s). 

What other support is available to local businesses? 

If employers have to close their premises, the government will provide £3,000 per month under the Local Restrictions Support Grant. Around 600,000 businesses will have their rent covered through this grant. 

Local authorities will be given a one-off funding of £1.1 billion to support businesses through this period. The government are also offering backdated cash grants—up to a maximum of £2,100 per month—in Tier 2 and 3 areas that suffered in England between 1 August and 5 November. 

For further information on the furlough scheme and how to claim, follow this link.

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2020-11-13

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