Furlough extension: What you need to know

Blogs 3 Feb 2021

The furlough scheme has been extended until 30 September 2021, including flexible furlough. Find out how the extension works and what you need to do as an employer.

This content was last updated 3 March 2021.

When does furlough end?

The Coronavirus Job Retention Scheme (CJRS) will now remain open until 30 September 2021, with employees receiving 80 per cent of their current salary for hours not worked, up to a maximum of £2,500. As businesses reopen, they will be asked to contribute 10 per cent in July 2021, rising to 20 per cent in August and September 2021.

Under the extension, businesses will have the flexibility to bring furloughed employees back to work on a part-time basis or furlough them full-time. Employers will need to pay National Insurance contributions and employer pensions for all hours worked or unworked.

Am I eligible for the furlough extension?

You do not need to have previously claimed for an employee before 30 October 2020 to claim.

You must have:

  • created and started a PAYE payroll scheme on or before 30 October 2020
  • created and started a PAYE payroll scheme on or before 2 March for periods starting on or after 1 May 2021
  • enrolled for PAYE online
  • have a UK, Isle of Man, or Channel Island bank account

For periods ending on or before 30 April 2021

For periods starting on or after 1 May 2021

  •  Employees were employed on 2 March 2021
  •  You have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021
  • You do not need to have previously claimed for an employee before the 2 March 2021 to claim for periods starting on or after 1 May 2021

For periods ending on or before 30 June 2021

How do I claim?

The extended CJRS will operate as the previous scheme did, with businesses being able to claim either shortly before, during or after running payroll. 

Claims must be made by the 14th for the previous month. Find out how to check and claim for employee's wages through the GOV.UK website.

Flexible furlough

What is flexible furlough?

Furloughed employees can return to the workplace on a part-time basis if they’re eligible. For example, you might be operating at a limited capacity and require your staff to work fewer shifts.

If an employee normally works five shifts a week, but you only need them two days a week, you can place them on furlough for the three remaining days. You would pay the employee’s wages and contributions as normal for the two days they work.

You will only be able to claim via the CJRS for employees’ wages for the periods where they haven’t worked.

How long can flexible furlough last?

Flexible furlough agreements can last any amount of time, however, the minimum period that employers can claim must be a minimum of seven calendar days.

How do I make a flexible furlough claim?

You will need to submit the following details to HMRC:

  • The usual hours an employee would be expected to work, based on the number of hours the employee was contracted for at the end of the last pay period.
  • The actual hours worked, or which will be worked.

Find out how to report employees’ wages to HMRC using the PAYE Real Time Information system when you’ve claimed wages through the CJRS.

Find out how to calculate claims for an employee who is flexibly furloughed

It’s important to remember the following:

  • When claiming for unworked hours, employers will need to report and claim for a minimum period of seven calendar days, unless a claim is being made for the first or last few days in a month.
  • Claim periods must not overlap months.
  • The number of employees you can claim for in any claim period must not exceed the maximum number of employees you have previously claimed for through the CJRS.

If you’re unsure, FSB members can refer to the flexible furlough factsheet on the FSB Legal Hub for more information.

Do I need to change my employee’s contract?

If you’re bringing back furloughed employees on reduced hours, you must agree to the new working patterns as a temporary variation of the contract, if the existing contract does not allow you to do so.

Agreements regarding work during furlough must be confirmed in writing under the terms of the CJRS rules.

You can read our guide to employment contracts to learn more.

What if I can’t afford employer contributions?

Furloughed employees are entitled to receive 80 per cent of their wages, up to a cap of £2,500, until the scheme ends. Contributions from the employer are mandatory. From July 2021, employers must contribute 10 per cent, rising to 20 per cent in August and September 2021.

You may need to remove employees from the furlough scheme and consider alternatives, such as short-term working or redundancies.

How does furlough affect workplace pension contributions?

The Pensions Regulator has stressed that whilst it may not be business as usual right now, your duties remain the same. Our guide to workplace pensions and the furlough scheme answers the most frequently asked questions.


FSB Workplace Pensions

FSB Workplace Pensions service provides independent financial advice to FSB members, helping thousands of businesses to set up their schemes and comply with legislation. It also offers a bespoke and fully supported payroll service.

Find Out More

Can I make an employee redundant whilst on furlough?

Yes. Our guide to the redundancy process during COVID-19 outlines everything you need to consider when making employees redundant, to ensure this is done in a compassionate and legal way.

Redundancy pay must be calculated based on standard wages, not furloughed wages, and you can’t use the CJRS grant for redundancy payments or notice pay.

What are the alternatives to redundancy?

Redundancies are a difficult decision for any small business owner to make. Although redundancies will reduce your immediate employment costs, there are other factors to be aware of, such as:

  • Redundancy payments
  • Time spent following processes
  • The potential risk of unfair dismissal
  • Loss of skills
  • Costs of recruitment in the future

There are a number of redundancy alternatives you may wish to consider:

  • Redeployment: Moving an employee to other areas of the business where there is more demand, either temporarily or permanently.
  • Lay-offs: If it’s not viable to keep an employee on the furlough scheme due to contributions, or they aren’t eligible, you may want to discuss the option of unpaid leave.
  • Short-time working or reduced hours: If there is a temporary downturn of work, you might want to place employees on reduced hours outside of the furlough scheme and only pay for the hours they work.
  • Short-term or long-term pay reductions: Temporary or permanent pay cuts may be agreed upon by staff to avoid redundancies in certain circumstances. It’s important to ensure that this payment is not below the National Minimum Wage.

In all cases, you must have the employee’s written consent unless their existing employment contract allows you to make these changes.

If the period of short-time working or lay-off is over four weeks or more than six weeks in a 12-week period, employees have a statutory right to treat themselves as dismissed by reason of redundancy and are entitled to redundancy pay (unless the employer serves a counter-notice stating otherwise where certain conditions are met.)

More questions about employment?

With FSB Employment Protection, you have access to all the HR help you need to run your business, including contract templates, detailed guides, and a 24/7 legal advice line.

FSB members have access to a detailed factsheet regarding the furlough scheme and all upcoming changes on the FSB Legal Hub.  

Useful resources


FSB Employment Protection

A wealth of important information and advice, available online anytime in case you face dismissal or discrimination claims and employment tribunals.

Find out more

Further reading

What is the redundancy process during COVID-19? Guidance and advice for small businesses
Article Mon, 22 June 2020

What is the redundancy process during COVID-19? Guidance and advice for small businesses

Losing employees is difficult for any small business. Our guide walks you through the redundancy process and how you can ensure it’s carried out in a compassionate, legal way.

How to bring an employee back from furlough leave
Article Mon, 15 June 2020

How to bring an employee back from furlough leave

Bringing your employee back from furlough? We look at how to recall your staff from furlough leave, including notice periods and flexible furlough.

COVID-19: Workplace pensions guidance for employers
Article Wed, 01 April 2020

COVID-19: Workplace pensions guidance for employers

What impact will COVID-19 have on workplace pensions? If your employees are on furlough, find out how this impacts your pension duties.