Furlough scheme extended until the end of March 2021

Rishi Sunak

Chancellor of the Exchequer Rishi Sunak has this afternoon confirmed at the House of Commons that the government will extend the furlough scheme until the end of March.

Sunak revealed that the furlough scheme will pay up to 80% of an employee’s wage up to £2,500 a month, and that a further review of the scheme will be discussed in the New Year.

Furlough was due to end on 31 October but has been extended to cover the new four-week lockdown in England.

So far, the scheme has cost the government more than £40bn.

Industry reaction

Responding to the Chancellor’s extension of the furlough scheme until March, Musab Hemsi, Partner, LexLeyton said: “This news will come as a major relief to the UK’s employers, and the extension of the scheme until at least March shows a welcome long-term commitment to supporting businesses through this phase of the crisis. It will give business leaders the financial assurance and time they need to plan and weigh up their options as they look beyond this lockdown with a view to reopening, in some capacity, for the festive period. As a result of the announcement, the planned Job Support Scheme Closed will essentially be replaced by the extended furlough scheme for the time being.

“Now that businesses have this commitment from the Chancellor, a period of stability is sorely needed. UK companies have been through a turbulent period and government support has at times been changed at the last minute and announced without sufficient information for businesses. We need to see a Treasury Direction – ideally this week – to enshrine the new plan and give employers the information they need. From here, businesses should have a solid foothold to firm up their plans for the remainder of the year and looking ahead to 2021.”

Rustom Tata, Chairman of law firm DMH Stallard and head of the firm’s employment group, said: “The Chancellor has today confirmed that the extension to the furlough scheme, initially set for one month, will be extended for a further four months to the end of March 2021.

“What this means for many employers and employees is a temporary reprieve in terms of substantial job losses over the Christmas and New Year period.

“However, with a review (and potential increase) of employer contributions in January, the underlying health of most businesses very much remains under the spotlight.

“Also, for those employers, particularly in London and the South East where wages tend to be higher, the cap of £2,500 means that for many employers there will still be additional costs where they have been topping up the amount of the furlough grant, most commonly to 80% of actual pay.

“This is turn is likely to mean that the wave of redundancies that has already started will continue.

“We still await the further details of the extended furlough scheme; it has previously been made clear that it will technically be a new scheme rather than a simple continuation of the old one.

“One critical point which is likely to influence employer behaviour is whether there will be a prohibition on using money under the furlough scheme to pay an employee’s notice.  The original scheme drew considerable criticism for permitting this, and this is one aspect which may well be changed.

“Finally, although the furlough scheme has generally been viewed as a success, albeit at considerable cost to the taxpayer, the Job Retention Bonus was widely criticised as of little meaningful value.

“The Chancellor today indicated that it would ‘fall away’.  Although they are likely to be relatively few in number, one can see that some employers who had planned to claim under the bonus will feel that annoyed that the Chancellor has been able to move the goal posts in this way.”

Lee Biggins, founder and CEO of CV-Library comments: While this funding is long overdue, we are thrilled to see that the government understands that employers across the country, including in the devolved nations, will need financial support past the end of this latest national lockdown. This decisive action offers more long-term certainty than we’ve seen in recent months, which will be essential for lasting recovery.

“This additional support offers a glimmer of hope for businesses on the brink of bankruptcy, as well as a life-line for some of the country’s most vulnerable workers. We applaud the government on their decision to protect the hard-working people of this country.”

Paul Holcroft, Managing Director at Croner said: “A week is undoubtedly a long time in coronavirus Britain. Seven days ago, employers were preparing to implement the new Job Support Scheme, safe in the knowledge that the furlough scheme was not going to be extended despite substantial calls for it to be so.

“However, this all changed on Saturday, with the government finally confirming it’s extension until the end of December. Today, it has gone further still, extending it to the end of March. By that point, it will have run for over a year, something that seemed unprecedented only a few days ago.

“Employers will no doubt breathe a significant sigh of relief at this news, with the extended scheme hopefully providing them with a life-line they desperately need as we head into the winter months and beyond. Unlike the situation only last month, the government will continue to provide the full 80% of employee wages until at least January, where it will be reviewed if employers will be asked to provide more. This means that, if an employer chooses to place employees on full furlough, they will only need to provide pay for national insurance and employer pension contributions.

“While we wait to hear if employer contributions to the scheme will change as we head into 2021, one thing is clear; the furlough scheme will be much more generous than the previously planned Job Support Scheme. For those employers who planned to use the new Job Support Scheme, it has been made clear that this scheme has been postponed indefinitely. Whether something of a similar nature to it will be announced come March does remain to be seen.

“Another central point made by the Chancellor today regarded the Job Retention Bonus, which was originally designed to incentivise employers to keep previously furloughed staff on once the scheme comes to an end. It has been confirmed that the Bonus as we expected it would no longer be available, and future incentive schemes will be announced in due course.”