The changing face of furlough – extension until 30 September 2021

As previously announced, the Government’s extremely well used and vital “furlough” arrangement, the Coronavirus Job Retention Scheme (CJRS), is now available to UK employers until 30 September 2021.

This is seen as the last of a number of extensions since CJRS was introduced back in March 2020. Initially it was expected to be in place for three months only until 31 May 2020.

Most organisations and employees are now looking to move away from furlough but it still provides a vital lifeline for some, as businesses recover tentatively and the country becomes vaccinated to reduce the threat of Covid-19.

As with all extensions to CJRS, there are new rules and tweaks to guidance that businesses need to be mindful of and we therefore set out below some of the key changes to be aware of from 1 May 2021 until 30 September 2021

Key Changes from 1 May 2021

After the publication of the latest in a long line of Treasury Directions on 15 April, the following changes from 1 May 2021 were confirmed:

  • Employers can now make a claim for employees that were on a RTI payroll submission before 3 March 2021. Previously only employees who were on the payroll on or before 30 October could be included in claims up to 30 April 2021.
  • From 1 July 2021 employer CJRS funding will reduce to 70 % of qualifying pay’ (capped at £2,187.50 per month), and from 1 August 2021 reduce further to 60% of qualifying pay (capped at £1,875 per month). The employer will be required to pay the employee 80% (or £2,500 per month, whichever is lower) of reference, meaning extra costs will need to be budgeted.
  • The averaging calculation for variably paid employees has been tweaked. This is likely to be important for those with hourly paid employees, those with employees that regularly get overtime or have employees who get paid different amounts each month (hospitality, agency and manufacturing being key sectors here). 

The original CJRS furlough pay calculation for variably paid employees had required employers to use pay in the periods where they were on sick leave, parental leave and other reduced rate leave.  This meant that the employee’s furlough pay was lower than if these periods had been discounted. However, from 1 May, these periods need to be discounted when working out the average pay. This will mean that the minimum furlough pay and CJRS claim for each employee will be calculated on a higher amount than  previously (unless already in excess of £2,500 per month). 

There is an exception to this change however. Where an employee was on one of these types of qualifying statutory leave for the entire reference period which is to be used to calculate their average wages, the employers should continue to include the days and wages related to that leave when calculating furlough claims for claim periods from 1 May 2021 (otherwise there would be no pay to base the claim on).

What is staying the same?

  • Employees need to receive at least 80% of their qualifying pay (or £2,500 per month whichever is lower) until 30 September 2021 – effectively businesses need to give their employees exactly what they have or are claiming from HMRC and top this up to the 80% or threshold level from July.  Businesses should check payslips against CJRS claims made for the employee to make sure no underpayments have been made – salary sacrifice can sometimes cause issues here.
  • Claims need to be made on a monthly basis using the HMRC portal by the monthly deadline date
  • Employees can continue to be fully furloughed, or furloughed on a flexible basis

Next steps

With over 200 changes to HMRC’s Furlough CJRS guidance and over 6,000 HMRC reviews now open on businesses who may have claimed too much furlough support, it is certainly worthwhile reviewing historic claims and taking advice. If you would like to discuss furlough or any aspects to help consider pay and reward as you look to leave furlough behind, please do contact us using the form below.

Contact us today

Furlough FAQs

For more detailed information, you can also read our updated Furlough FAQs by clicking the button below.

Read more

National contact