End of furlough: What you need to know

Blogs 2 Aug 2021

The furlough scheme will end on 30 September 2021. From changing contracts to alternatives to redundancy, find out what you need to do as an employer.


This content was last updated 17 August 2021.

When does furlough end?

The Coronavirus Job Retention Scheme (CJRS) will now remain open until 30 September 2021, with employees receiving 80% of their current salary for hours not worked, up to a maximum of £2,500. 

From 1 August 2021, employers must contribute 20%. For a summary of the change and example calculations, please visit the GOV.UK website. Claims for September furlough pay must be submitted by 14 October 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.

What is the process for ending furlough?

You can watch an on-demand webinar about the end of furlough here.

There is no set process for ending furlough unless the furlough agreement provides one. However, employers should give employees on furlough reasonable notice that they are required to return to work from either full or flexible furlough and details of any new working pattern, or confirmation that they will return on normal working days/hours.

  • This should be confirmed in writing.
  • Consult with staff in advance. 
  • Address any difficulties, concerns or anxieties the employee may have in returning to the workplace (and discuss how these could be overcome).

FSB members can access a template letter “Notification of end of Furlough and Request to return to Normal Working Arrangements” on the FSB Legal Hub.

What if my employee returns to the workplace on their existing (pre-furlough) terms and conditions?

This is likely to apply where the employer anticipates good trading conditions or where no changes to the workplace would impact the employment contract. You should consider induction/refresher training/support (particularly if full furlough). Ensure your employee is aware of any changes to workplace procedures.

The employee’s circumstances may have changed, for instance, a new job during furlough or childcare issues, which may result in a flexible working request. You should:

  • Check contract of employment
  • Can agree informally and record any agreement in writing as a variation to the existing contract
  • Deal with request reasonably – you can only reject a request for 1 of 8 business reasons set out in law (e.g. impact on performance)
  • Ensure reason for rejecting is based on evidence
     

What if my employee returns to the workplace on varied terms and conditions?

This is likely to apply where the employer anticipates challenging business conditions or where changes to the workplace impact the employment contract. Changes can be either permanent or temporary. You should consult with the employee and explain the business rationale for proposed temporary or permanent changes.

What kind of changes?

This depends on your business circumstances. You can either introduce where the contract permits the change or the employee agrees to it.

  • Reducing employees’ hours/days of work due to downturn in work.
  • ”Private” furlough/lay-off/short-time working.
  • Hybrid working/staff work from home.
  • Consult with employees and explain the business rationale for proposed temporary or permanent changes.
  • Confirm agreement in writing within 1 month of the change.

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.


 

Stay in control of pensions and payroll

FSB Workplace Pensions is more than just software. Access comprehensive support for small employers including a discounted payroll service and tailored workplace pensions packages.


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



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FSB Employment Protection is your go-to for HR advice, available 24/7. Speak to employment solicitors for advice, download template documents and have peace of mind with employment tribunal insurance.


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.