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What is furlough and how does the scheme work? Employees’ rights and pay information

The scheme has been extended until the end of April 2021


There is growing speculation that the government will extend its furlough scheme ntil summer, throwing millions of struggling companies and business owners a much-needed lifeline.

The scheme was meant to come to a halt at the end of April but Rishi Sunak is expected to push the deadline back, according to the Financial Times.

This means the government will continue paying 80 per cent of furloughed workers’ wages, up to £2,500 a month.

The newspaper reports that the chancellor is also considering extending the £20-a-week uplift in universal credit - due to expire at the end of March - by six months.

The business rate relief, introduced last March to help retailers that have been unable to open due to restrictions, is also set to be extended.

Mr Sunak is reportedly considering a 2 per cent tax on online sales in autumn which could initially raise £2bn and encourage people back to the high street.

Any extension of furlough is likely to be welcomed by the thousands of businesses already calling on the government to help them get back on their feet post-lockdown.

PRU/AFP via Getty Images

What is furlough?

If a company is unable to operate or they have no work for staff to do during the pandemic, workers can be put "on furlough", which means they are kept on the payroll and not made redundant.

Employers facing difficulties are able to access support through the Coronavirus Job Retention Scheme to continue paying 80 per cent of staff wages, to avoid redundancies and keep paying staff.

Any workers on the company's PAYE payroll before February 28 can be put on furlough.

Under the Government scheme, workers will be paid 80 per cent of their wages, up to £2,500 a month, and continue to pay tax on their income.

Employers can agree to pay the extra 20 per cent, but do not have to.

It is important to note that both you and your employer must agree to put you on furlough and your employer must confirm in writing that you have been furloughed to be eligible to claim.

How long will it last?

The scheme was initially due to run until June 1, then it was moved to October 2020 before it was extended again until the end of April 2021.

What happens if I am furloughed?

If you are furloughed, you are not allowed to work for the company, even if you can or you want to.

You can do training or volunteering, as long as you’re not making money or providing services for your employer or a company linked to your place of work.

Chancellor Rishi Sunak during a media briefing in Downing Street / PA

Remember, your employer cannot ask you to do work for another linked or associated company.

If your employer chooses to place you on furlough, you will need to be furloughed for a minimum of three weeks.

But your employer can place you on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open.

You might be able to get a different job while your current employer has put you on furlough, the Government said, as this will not affect the grant they can claim to cover your wages - but check with your employer first.

It is important to be aware that your employer can still make you redundant while you’re on furlough or afterwards.

But your rights as an employee are not affected by being on furlough, including redundancy rights.

Here, David Barzilay explains workers' rights in more detail and answers some key questions.

Can I get sick pay on furlough?

You have the same employment rights as when you were working. So you are eligible for statutory sick pay.

Is furlough pay taxed?

Yes, the furlough grant is subject to income tax and national insurance in the normal way. Commission, fees and bonuses are excluded for the purposes of determining monthly earnings.

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Are zero hours contract workers still eligible to be put on furlough?

Yes, as long as you have been on the PAYE payroll since the end of February. The same goes for those on part-time or agency contracts.

Does it affect my pension contributions?

The minimum automatic pension contributions continue to be paid.

How do I claim?

Businesses can claim this money from through a Government application scheme.

Employees hired after February 28 cannot be furloughed. This group are particularly vulnerable as they may have been out of work before being hired.

The Treasury previously said that about 5,000 HMRC staff will work on the project, and money should reach bank accounts in six working days.

Phone lines and web-chat services are also available to help answer applicants' questions.

Can I furlough myself if I run my own business?

Yes, if you are paid through PAYE. You should be able to claim up to £2,500 a month but your dividends are not included in the scheme and you cannot do any work during this time.

Can I furlough my cleaner or the children’s nanny?

Yes, provided they are paid through the PAYE system and were employed on or before February 28.

If your cleaner or nanny is self-employed they can use the Government’s income support scheme to claim for 80 per cent of their average monthly profit.

How does furlough affect parental leave?

If you are on maternity, adoption, paternity or shared paternity leave the normal rules apply. If your earnings have reduced because you were put on furlough before you went on leave this may affect your statutory pay.

Is there a time limit to how long I could be furloughed?

When it was first announced the furlough scheme was for the period from March 1 to May 31. However, the Government has now extended it until end of April 2021.

What does “no work” mean for the purposes of furlough?

No work means exactly that. You cannot answer emails or make calls, or undertake any activity at all.

The only exceptions are individual study and training, and undertaking volunteer work. Neither of these exceptions will apply if they result in revenue being generated for your company.​

Can I work for someone else?

Employees may be able to work for another employer. However, it must not breach the contractual obligations set out with their existing employer.

Most contracts are strongly worded in this regard. In practice, they will only be able to work outside of the times they usually work.

If your employer asks you to go on furlough and you refuse, you may be at risk of redundancy or termination of employment, the Government also says. It depends on the circumstances of your employer.

However, ending your employment must be in line with the usual redundancy rules and rights.

To be paid, employers will make the claim through a Government portal and will receive a grant from HMRC to cover furloughed employees' wages.

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