What furlough means – everything you need to know about the furlough rules and regulations

What furlough means and how the Coronavirus Job Retention Scheme (CJRS) worked

As of 30 September 2021 the furlough scheme, which was set up to support businesses during the Covid-19 pandemic, has ended. But what is furlough exactly?

When a company doesn't have enough work or money coming in to keep the workforce as it is, they can put staff members on temporary leave. This is usually done as a short-term solution to cut costs during a temporary change of circumstance.

The government introduced a plan to financially support businesses during the coronavirus pandemic, helping them keep as many employees as possible on their payrolls during this difficult time. It was later confirmed the scheme would be extended as a second lockdown was announced on 31 October 2020, and 4 January 2021 respectively. The Chancellor had continued the Coronavirus Job Retention Scheme (CJRS) from March 2021 until the end of September 2021.

How did the Coronavirus Job Retention Scheme work?

Under the Coronavirus Job Retention Scheme (CJRS), all employers across the UK had the option to furlough their staff instead of making them redundant or being laid off. This scheme allowed the individual to still be employed by the company while receiving up to 80% of their pre-tax salary up to a maximum of £2,500 per month, for an agreed amount of time. If your employer planned to use the job retention scheme, you’d keep your job – and all the rights that come with being employed - but you wouldn’t be doing any work while on furlough.

Who was Eligible for the Coronavirus Job Retention Scheme?

When the scheme was first introduced, anyone who was on the PAYE payroll of a company on or before 19 March 2020 had the option to be offered furlough. This applied whether they were:

• Full time

• Part time

• On a zero-hour contract

• An agency worker or on a flexible contract

• An apprentice (you can still continue your training whilst on furlough

After confirming that the scheme had been extended, an employer or employee could use the extension even if they had not used the scheme before. Following the 2021 Budget, it was confirmed that the CJRS had been extended, running until the end of September 2021. In order to qualify for the CJRS scheme, applying on or before 30 April 2021, you would’ve had to be on your employer’s PAYE payroll since 30 October 2020.

If there was a claim for the scheme from 1 May 2021, the qualifying period was slightly different. Your employer would have needed to put you on their payroll on 2 March 2021. They would then have to give PAYE Real Time Information (RTI) notification of earnings to HMRC between 20 March 2020 and 2 March 2021.

Anyone on the 39 weeks of Statutory Maternity Pay (SMP) will still have been paid standard maternity cover by their employer. Also if you’re sick and still employed, you’d still be eligible to receive sick pay or benefit from Statutory Sick Pay (SSP) as outlined in your contract with your employer. However, you could still be furloughed once you are able to return to work.

If you agreed to being furloughed, and accepted any changes in pay, it’s advisable to keep record of any changes to your agreed employment contract for five years.

How much salary was paid through furlough?

Employers claimed a grant from Her Majesty’s Revenue and Customs (HMRC) to pay you for 80% of your gross monthly salaryup to a maximum of £2,500 per month. From 1 July 2020, employers could bring back furloughed employees to work a flexible shift pattern. Under the extension to the scheme, flexible furloughing was allowed in addition to full-time furloughing, meaning employees could work any number of hours and have any time they weren’t working topped up through the furlough scheme.

Under the extension to the furlough, the government returned to paying 80% of wages for hours not worked up to a cap of £2,500 with employers paying National Insurance and pension contributions, as well as paying employees for hours worked in the normal way.

The amount contributed by the government for the extension into March was higher than the last months of the original furlough scheme. Employers had to start contributing from September if they wished to keep an employee on the scheme.

In September 2020, the government paid 70% up to £2,187.50, with employers paying the remaining 10% of the pre-tax salary up to £312.50. In October, the government started paying 60% up to £1,875, with employers paying the remaining 20% up to £625.

For those who were put on furlough and struggled with reduced salary, they could apply for Universal Credit.

Can I still be made redundant after furlough?

After your agreed furlough leave is up, your employer may decide to make redundancies. The hope is that by using the furlough facility it wouldn’t be necessary to make people redundant. However, if your company did decide to make you redundant, you will still have the same rights when it comes to notice periods and statutory redundancy rights.

Is tax paid on furlough?

Yes – during the Coronavirus Job Retention Scheme, the HMRC grant would’ve been paid to your company, who then used this to pay 80% of your gross monthly salary up to £2,500 the same way they’d usually pay you. Any tax or other monthly deductions from your pay would still be taken out as normal during furlough.

What were the conditions of working while on furlough?

The government stated that a furloughed employee cannot do anything that:

• Made money for your business or any associated companies

• Provided services for your company or any connected businesses

• Put you in breach of your contractual obligations inside your normal working hours as an employee of the company where you work.

Where can I get help?

If you are at risk of not meeting your financial commitments as a result of being furloughed, there are ways to help you manage your money. For example, you can contact your credit provider directly to request an emergency payment freeze. The emergency payment freeze means you have agreed in advance to stop making repayments for an agreed length of time.

If you are approved for a freeze, the status of your account will be frozen at the point of the agreement. Your credit provider will then continue to report this repayment status to the CRAs (credit reference agencies) for the duration of the payment freeze to minimise the impact on your credit score.

Other steps to consider after furlough could include rethinking your budgets. Our interactive budget planner can help you see where your money is going, and work out if there’s anything you can save on during this time.

By budgeting, you might be able to avoid a missed or late payment. But if your monthly income had been cut by being on furlough and you think you would miss a payment, there are steps you could consider to help manage the impact, including contacting your lender upfront or asking for impartial debt advice from services such as StepChange.

This article was updated on 28 September 2021; all information was correct at the time of writing.

You can find more information on government employment policy at gov.uk.

If you want to know more about your credit report, you can use Equifax Credit Report & Score. This gives access to your personal credit score, as well as the means to manage your credit report.