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Furlough scheme extended: all you need to know

Furlough scheme extended: all you need to know
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Due to the pandemic, the furlough scheme has become an important part of many working lives in the UK.

What is the current plan?

The scheme was originally set up by the UK government for 4 months from 1 March 2020. It was later extended until 31 October 2020. The scheme was set to be replaced by the Job Support Scheme, but this plan has since been shelved.

Instead, on 5 November 2020, Chancellor Rishi Sunak announced that the existing furlough scheme will be extended until the end of March 2021.

What is the furlough scheme?

If the company you work for has temporarily ceased operations or has no work for you due to the pandemic, it can agree to keep you on the payroll using government assistance.

This government assistance comes in the form of the Coronavirus Job Retention Scheme (CJRS). If your employer is eligible and makes an application, you will be put on ‘furlough’. Hence the reason why the scheme is also known as the ‘Furlough Scheme’.

How does it work?

Your employer will be able to pay you 80% of your regular wages up to a monthly cap of £2,500 through the scheme. The remaining 20% can be paid directly by your employer, but they may decide not to do this.

So if you are furloughed, there is a possibility that you will have to take a 20% pay cut if you are normally paid less than £2,500 per month and a greater pay cut if you are paid more than £2,500. You are also expected to pay income tax and your employer must pay national insurance.

The furlough scheme allows for flexible working, so an employer could allow a furloughed employee to work part-time while being furloughed the rest of the time.

Who can claim?

In order to be eligible, you must have been on the PAYE payroll by 30 October 2020. This means that the HMRC will need to see a Real Time Information (RTI) submission notifying payment to you between 20 March 2020 and 30 October 2020.

You could be furloughed if you are any of the following:

  • A casual employee

  • On a zero hours contract

  • On a temporary contract

  • An agency worker

  • An apprentice

  • On a fixed-term contract

How can I claim?

Your employer will have to claim on your behalf. They can claim now even if they have not used the scheme previously.

As well as starting their employees on the payroll scheme before 30 October, they will need to be enrolled for PAYE online, have a UK bank account and be making a claim for each employee for a minimum of seven days in a calendar month.

The government will review the furlough scheme in January 2021 with a view to making a decision on how much employers can claim in February and March.

Take home

While we are still experiencing the effects of the pandemic, the UK government’s response may change. Employees, whether on the furlough scheme or not, should check for future changes to legislation that may take place.

Further information on the latest news on government support schemes is available on the gov.uk website.

If you are experiencing financial difficulties, it is worth putting together a plan of action with respect to any outstanding debts. Also, contact Citizen’s Advice if you need financial help or advice.

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