Furlough v2.0

The Coronavirus Job Retention Scheme (Furlough Scheme) was originally due to come to an end on 31 October however it has now been extended until 31 March 2021.


James Rowland

Commercial Director James leads Account Management, Sales and Marketing at Neathouse Partners.


11 November 2020


17 July 2024
5 min read

The Coronavirus Job Retention Scheme (Furlough Scheme) was originally due to come to an end on 31 October however it has now been extended until 31 March 2021.

The new scheme generally works in the same way as the previous scheme, with a few important changes.

As ever, the scheme is subject to review and the Government may well change it again so it should be kept under close review.

At a glance:

  • All employees can access the scheme, not just those who used the old scheme.
  • Employers can claim 80% of the furloughed employee’s usual salary for hours they do not work, subject to a cap of £2500 per month.
  • Employees can be placed on “flexible furlough” – meaning that they can work part time and also claim the furlough grant for their unworked hours.
  • The grant no longer covers NI or pension contributions.
  • There is no longer a 3-week minimum furlough period.
  • Employers are not required to contribute toward the cost of the scheme.

Important – further changes are expected to furlough in the coming weeks. The Government has indicated that it may review whether employers can use furlough to cover notice periods.

How the furlough scheme works 

The furlough scheme consists of two main options:

1) Full furlough 

Employees will be furloughed full time and will not be able to undertake any work for the employer.

2) Flexible furlough

Employees can work for any period and under any work pattern except during furlough hours.

Employers can flexibly furlough employees for any length of time as there is no minimum furlough period.

Unless the furlough period is specified in the agreement, it must be for at least 7 calendar days.

Employees on furlough 

During furlough hours, an employer cannot require an employee to do any work that:

  • makes money for the employer;
  • provides services for the employer;

However, the employee can:

  • engage in training;
  • volunteer for another organisation;
  • work for another employer (although the employer will want to ensure that this does not harm their business).

Employees will continue to pay tax when they are on furlough.

Employers must continue to pay National Insurance contributions and employer pension contributions whilst their employees are on furlough.

Employees will retain all their employment rights, such as:

  • Statutory Sick Pay (SSP);
  • Annual leave;
  • Parental rights;
  • Rights against unfair dismissal;
  • Redundancy payments.

Holiday pay 

Employees will continue to accrue annual leave as normal while they are furloughed.

Employees can take holiday while they are on furlough – for employees on flexible furlough, hours taken as holiday should be recorded as furloughed hours rather than working hours.

If an employee on furlough takes holiday, they should be paid their usual holiday pay, which will require the employee to top up the grant to 100% of the employee’s wage.

This can be beneficial as employers can essentially offset 80% of the cost of holiday by claiming under the furlough scheme.

Claim information

A new point was announced on 11 November - from December 2020, HMRC will publish employer names and company registration numbers of those who claim under the furlough scheme for December onwards.

It is currently unclear what the purpose of this is, or whether this will be subject to further rules (i.e. it may be the case that only larger employers are named).

Which employers are eligible to use the furlough scheme?

All employers who have a UK bank account and a UK PAYE scheme can claim under the furlough scheme.

It does not matter if an employer has previously used the furlough scheme or not.

To claim under the furlough scheme, employers must confirm in writing to the employees that they have been placed on furlough.

The employer must:

  • ensure the agreement complies with equality and discrimination laws;
  • retain a written record of the agreement for 5 years;
  • record the hours that employees work and the hours that they are furloughed.

If an employer wishes to flexibly furlough employees, they must seek agreement from the employees and keep a new written furlough agreement.

Which employees can be placed on furlough?

Employers can furlough any employee who has been employed since 30 October 2020, provided they were:

  • included on the payroll between 20 March 2020 and 30 October 2020, and
  • included in a ‘Real Time Information’ (RTI) submission to HMRC between 20 March 2020 and 30 October 2020

It does not matter what type of contract an employee is employed under. All types of employees can be furloughed, including those on flexible and zero hours contracts.

Foreign national employees on any category of visa can be placed on furlough.

Employees on fixed term contracts

If an employee’s fixed term contract has not expired by 1 November 2020, it can be extended or renewed, with the employee being furloughed (provided they were employed before 30 October 2020).

If an employee’s fixed term contract expired after 23 September 2020, they can be re-employed and placed on furlough provided all other eligibility criteria are satisfied.


Apprentices can be placed on furlough like any other employee and they will continue to train whilst on furlough.

The apprentice must be paid no lower than the Apprenticeship Minimum Wage, the National Living Wage or the National Minimum Wage (whichever applies) for all time spent on training.

This means the employer will need to cover any shortfall between the amount claimed under the furlough scheme and the relevant minimum wage when the apprentice is training.

Employee transfers under TUPE

A new employer will be able to claim in respect of the employees of a previous business transferred for a claim period before 31 October 2020 if:

  • TUPE applies
  • the employees were previously furloughed by the prior employee

A new employer will be able to claim in respect of the employees of a previous business transferred for a claim period after 1 November 2020 if:

  • TUPE applies or PAYE business succession rules apply
  • the employees were transferred to the new employer on or after 1 September 2020 and were employed by either their prior employer or the new employer on 30 October 2020
  • there was an RTI submission made to HMRC in relation to the employees by either employer between 20 March 2020 and 30 October 2020

Employees with other employment 

An employee with multiple jobs can be furloughed for each job separately.

An employee can also be furloughed and receive furlough payments for one job but continue to work and earn their normal salary for another job.

Employees can do voluntary work for another organisation during the time in which they are furloughed.

Employees who have been made redundant 

Redundancies should be conducted according to the usual rules.

Employees being made redundant can be furloughed during their notice period, but furlough payments must not be used to substitute any redundancy payments.

Statutory redundancy pay and notice pay should be based on the employee’s normal salary rather than the reduced furlough rate.

Employees made redundant from 23 September 2020 can be re-employed and placed on furlough, provided:

  • they were on the PAYE payroll on or before 23 September 2020
  • an RTI submission in relation to them was made between 20 March 2020 and 23 September 2020

Employees with Covid-19 or other health conditions 

Employees can be furloughed if:

  • they cannot work following public health guidance, e.g. if they are clinically extremely vulnerable
  • they cannot work due to caring responsibilities resulting from coronavirus

Short-term illness and self-isolation are not reasons to place an employee on furlough.

Employees on sick leave or self-isolating as a result of coronavirus should not be furloughed but may be entitled to Statutory Sick Pay (SSP).

Employees on sick leave who are furloughed for business reasons should stop receiving SSP and instead receive furlough payments.

Employers can claim payments under the furlough scheme and claim SSP payments for the same employee but not for the same period.

Furloughed employees retain the right to receive at least SSP if they are ill, they need to self-isolate or they are clinically extremely vulnerable.

If an employer moves a furloughed employee who is sick to SSP, they can no longer claim under the furlough scheme. The employer must pay SSP but may be able to claim for up to 2 weeks SSP if the sickness is related to coronavirus.

Employees returning from leave

Statutory parental leave and pay are subject to the normal rules.

Employees returning from statutory parental leave after 10 June 2020 can be furloughed for a claim period before 31 October 2020, provided that:

  • the employer has previously furloughed an employee for at least 3 consecutive weeks between 1 March 2020 and 30 June 2020
  • the employee started their parental leave before 10 June 2020 and has returned after 10 June 2020
  • the employee was on the PAYE payroll and an RTI submission was made to HMRC in relation to them on or before 19 March 2020

The normal furlough scheme rules apply to employers wishing to furlough returning employees for a claim period from 1 November 2020.

An employee must provide 8 weeks’ notice if they wish to end their maternity leave early and be placed on furlough.

Neathouse Partners: Your Trusted Partner

We empower employers across the UK with tailored advice, offering strategic guidance that aligns with business needs and goals.

99.2 %

Customer happiness rating

99.2 %

Customer happiness rating



Qualified experts

Chester Headquarters

Regus House, Chester CH4 9QR

Success stories
Having used Neathouse for some time now, I can highly recommend their services. I always get a quick response from my lawyer, the advice is practical, and I always feel confident that they’re helping us with the correct approach.
Jasmin Bemmelen Head of People and Culture @ Action Tutoring Ltd

Have questions?

Get in touch today

Contact us, and our team will get back to you within 24 hours. We value your questions and are committed to getting them answered quickly.

Get a quote

Hello! I am Nicky

Just fill in the form below with your details, and I will arrange for a member of our team to give you a call.

By clicking, you agree to our Privacy Policy