When does furlough end? Furlough scheme guide for SMEs

When does furlough end? Can you furlough yourself? And how do I furlough an employee? Our guide for small businesses explains more about the furlough scheme, otherwise known as the Coronavirus Job Retention Scheme (CJRS).

When does furlough end for small businesses?

The furlough scheme will end on 30 September 2021, Rishi Sunak confirmed in his Spring Budget announcement.

Despite delays to full unlocking all over the UK, it doesn’t look like the government will extend the furlough scheme any further.

The furlough scheme is also still due to be tapered from July 2021, meaning employers will need to contribute for hours not worked by employees.

is my business allowed to furlough people?
is there a furlough scheme for the self-employed?

Here’s a closer look at the definition of furlough, who’s eligible for the scheme, and how it works.

What is the furlough scheme?

The furlough scheme was introduced in March 2020 to help protect jobs throughout the pandemic.

Furlough is a type of leave from work. It lets you keep your staff on without them working, while the government pays a portion of their usual wage.

Rather than closing up shop and making people redundant, furloughing employees is one way businesses can try to stay afloat while they’re unable to trade (either completely or to their usual capacity).

This is seen as better than laying them off without pay or making them redundant because of the coronavirus pandemic.

You can define your employees as ‘furloughed workers’ under the furlough scheme if you pay them through PAYE (Pay As You Earn).

What happens during furlough?

Your employees will be off work and can’t do any work for you while they’re furloughed.

Your employees will be paid 80 per cent of their monthly earnings for hours not worked, up to a maximum of £2,500 a month. This level of pay will continue until 30 June 2021. After this, the government contribution will start to wind down.

But you can furlough flexibly, meaning your employees can work for you part time – you’ll pay their usual wage.

New rules for furloughing employees from July 2021

After 30 June 2021 the support will be tapered – as an employer you need to contribute towards hours staff don’t work:

from 1 July the government will pay 70 per cent and employers will pay 10 per cent
in August and September the government will pay 60 per cent and employers will pay 20 per cent

The aim of the furlough scheme is for businesses to bring workers back off leave when their furlough ends, so it’s important to do what you can to protect jobs.

If you’re using the scheme, you’ll still pay employer National Insurance Contributions (NICs) and pension contributions. You can also choose to top up your employees’ wages if you wish.

Is my business allowed to furlough people?

Any employer in the UK with a UK bank account and UK PAYE scheme is eligible for the Coronavirus Job Retention Scheme (CJRS).

How to furlough an employee

Before you begin furloughing workers through the furlough scheme, they need to have agreed in writing to stop working for you and to be furloughed.

You need to:

report and claim for a minimum period of seven consecutive calendar days
report actual hours worked and the usual hours an employee would be expected to work in a claim period
pay employees for hours worked subject to their employment contract and employers will be responsible for paying the tax and NICs due

So when calculating a claim you need to:

work out the length of your claim period
understand what you can include when calculating wages
work out your employees’ usual hours and furloughed hours

There are deadlines for when claims must be submitted by – for example, if you’re claiming for furlough days in June, the final deadline is 14 July 2021.

Which type of workers can be furloughed?

Furloughing employees

To furlough an employee from May 2021, they need to have been on your business’s payroll on or before 2 March 2021.

You must have made a Real Time Information (RTI) submission for each furloughed employee between 20 March 2020 and 2 March 2021. RTI means information about tax and other PAYE deductions that you transmit to HMRC every time you pay an employee.

If your employee is shielding in line with public health guidelines or lives with someone who’s shielding, they can be furloughed. Similarly, if an employee is temporarily unable to work because of childcare responsibilities or caring for a vulnerable person at home, they can be furloughed.

The government says that short-term illness and self-isolation shouldn’t be a consideration when deciding whether to furlough employees.

Furloughing casual workers

The scheme has been put in place to support all workers (not just employees) paid through the PAYE system.

This means if you have apprentices, casual workers or zero-hours contract workers, they’ll still be covered if they’re paid through PAYE.

You can submit claims on the government portal.

What do I need to furlough an employee?

It’ll be helpful to have the following information to hand:

your UK bank account number and sort code (which must accept BACS payments)
your employer PAYE scheme reference number
the number of employees to be furloughed
each employee’s National Insurance number (contact HMRC if you don’t have this)
the start date and end date of the claim
the full amount you’re claiming for, including employer National Insurance contributions and employer minimum pension contributions
your phone number
a contact name
your name (employer name), or your corporation tax unique taxpayer reference, or your Self Assessment unique taxpayer reference, or your company registration number
your Government Gateway user ID and password (which you get when you register for PAYE online)

What do I need to pay my workers while they’re furloughed?

Each eligible worker gets 80 per cent, or up to £2,500 a month, paid through the Coronavirus Job Retention Scheme (CJRS). You then have the option to decide whether to top up their wages to 100 per cent, but you don’t have to if you’re not able to.

If a furloughed employee is normally paid minimum wage, as long as they’re not doing any work for you, the minimum wage threshold doesn’t have to be met. This means they can be paid 80 per cent of their usual minimum wage income.

However, if they do any training while furloughed, they need to be paid the minimum wage for the hours they spend training. For example, this might apply to an apprentice who continues with their apprenticeship studies while furloughed.

In July 2021 employers need to contribute 10 per cent for an employee’s hours not worked, with the government paying 70 per cent.

In August and September 2021 employers will contribute 20 per cent, with the government paying 60 per cent.

What if the worker has more than one job?

If, for example, someone has two jobs, it’s possible for them to be furloughed for one or both of those jobs.

Each job is dealt with separately. If the worker is furloughed for both jobs, they’ll be eligible for the associated financial support (80 per cent pay, or up to £2,500) for both.

Do businesses pay furlough back?

Some larger businesses, including Asos and Ikea, decided to pay furlough money back in 2020 after deciding they didn’t need the cash.

But as furlough is a grant and not a loan, businesses don’t need to pay furlough back, as long as they’ve used the scheme correctly.

Is there a furlough scheme for the self-employed?

If a worker is self-employed, they won’t qualify for the furlough scheme, but they might be eligible for the Self-employed Income Support Scheme (SEISS). This scheme has been set up to help self-employed people whose businesses have been adversely affected by the pandemic.

The fifth and final grant will be available in July. It should cover people newer to self-employment as it takes 2019-2020 tax returns into account.

They’ll need to have trading profits of less than £50,000 and have submitted a Self Assessment tax return by 2 March 2021.

The fifth grant covers 80 per cent of average profits if your turnover has fallen by more than 30 per cent. If you haven’t been affected, you can get a 30 per cent grant.

Can you furlough yourself if you’re a company director?

The guidance from HMRC appears to be that, as ‘office holders’, company directors may be furloughed and still carry out their ‘statutory duties’. They should do ‘no more than would reasonably be judged necessary for that purpose’, according to the government website. This means they shouldn’t do work they’d be doing ‘in normal circumstances to generate commercial revenue or provide services to or on behalf of their company’.

Furlough letter template when furloughing an employee

A furlough written agreement you make with an employee might generally include the following details:

the start date of the furlough
how much the furloughed worker will be paid
when the furlough will be reviewed
how to keep in touch during furlough

This article is intended for guidance only. You should seek professional advice before making any decisions regarding furloughing workers.

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When does furlough end? A guide to furlough for business owners