Chancellor extends furlough to March

The Chancellor has announced that the furlough scheme, initially set for one month, will now be available until the end of March 2021 across the UK.

Currently the Government has committed to pay 80% of wages capped at £2,500 a month, while employers cover National Insurance and employer pension contributions which, for the average claim, accounts for 5% of total employment costs. They can also top up employee wages to 100%, but this is not mandatory.  A review of employer contributions will take place in January.

The furlough scheme was initially extended until 2nd December, but the Chancellor says support needs to be put in place for long enough to help businesses recover and get back on their feet and to give them greater certainty in the coming months. The Government says that evidence from the first lockdown showed that the economic effects are much longer lasting for businesses than the duration of restrictions.

Rustom Tata, Chairman of law firm DMH Stallard and head of the firm’s employment group, welcomed the news, but said it may not be enough to stop some redundancies. He said: “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.”

He added that the Chancellor seemed to indicate that the widely criticised £1,000 Job Retention Bonus may ‘fall away’.  Tata said: “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.”

Detailed guidance on the furlough scheme is expected to be published shortly.

Following the announcement, the Early Years Alliance called on the government to commit to continuing to provide early entitlement funding [for three and four year olds and disadvantaged two year olds] regardless of childcare attendance figures until at least spring 2021.

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