More details emerge on furlough extension rules

Please Note: All information correct at time of writing on 6 November 2020. We do our very best to make sure our information is as up to date as possible, but we’d encourage you to check the government website for updates as they happen.

Following the Chancellor’s surprise announcement yesterday (5 November) that furlough will be extended until 31 March 2021, HMRC has published a policy paper revealing more details of how the extension will operate in advance of the full guidance which will be published on 10 November.

Our Employment Law experts have summarised the highlights from the paper below. This information will be relevant to the operation of the extended scheme from 1 November until 31 January. Guidance on how the scheme will work from 1 February will be sent out in January, following a government review.

Except where stated otherwise, the rules of the previous scheme will apply (although we’ll need to see the full guidance before we can be sure of the extent of changes).

Financial support available

This remains at 80% of lost wages in respect of hours not worked up to a monthly cap of £2500, which is proportional to hours not worked (therefore if an employee worked 50% of their usual hours, the monthly cap for lost hours would be reduced by 50% to £1250).

Employers will not have to contribute to the 80% but will have to pay employer’s National Insurance Contributions and pension contributions. For hours worked, employers will pay wages for those hours as normal, as well as employer’s National Insurance Contributions and pension contributions.

Eligible employees

Employees can be furloughed under the extended scheme even if neither they nor the employer have used the scheme previously. However, they must have been employed on 30 October and included in a Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020.

The employee agreement

It seems as though lessons have been learned from the confusion which arose when the furlough scheme was first launched when the requirements of the employee agreement initially differed between the Treasury Direction and HMRC guidance. The policy paper makes it clear what is required.

The paper states that these changes to employers’ contractual arrangements with their employees must be done by agreement and to be eligible to claim “employers must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed or flexibly furloughed”.

The paper also states that the employee does not need to provide a written response and therefore it is sufficient to reach agreement verbally and then write to the employee confirming the agreed arrangements in writing.

The agreement must “reflect the hours the employee has actually worked or not worked over the period of the agreement”. There’s nothing in the policy paper which would rule out reaching a broad agreement which makes it clear that hours worked may vary according to the needs of the business and setting out how hours worked, and hours lost will be treated (assuming the employee has agreed to this).

Given the last minute changes to the support available, the paper specifically provides that a retrospective flexible furlough or furlough agreement which has effect from 1 November can be made up to and including 13 November (this must also be compliant with employment law and therefore the employee would have to agree to it operating retrospectively). Any agreement after that date can’t be relied on retrospectively.


The extension of the scheme will continue to give employers complete flexibility to use the scheme for any working arrangement and these arrangements can vary to meet the needs of the business (but it’s important that this flexibility is also reflected in the agreement with the employee).

Calculation of claims under the extended scheme

Where employees have been furloughed previously, employers should use the same basis of calculating claims that they applied in August 2020. This also seems to be the case for employees who were employed and included on RTI submissions on or before 19 March 2020 even though they were not put on furlough. However, the following new rules for calculating claims will apply where:

  1. employers who have not used the scheme previously or
  2. the employee was hired between 20 March 2020 and 30 October

Employees on fixed pay – claims will be based on 80% of the wages payable in the last pay period ending on or before 30 October 2020.

Employees on variable pay – claims will be based on 80% of the average wages payable between the start of their employment or 6 April 2020 (whichever is later) and the day before their furlough period begins (these dates are inclusive).

The calculation of usual hours will also be done on this basis, namely:

Employees on fixed hours – usual hours will be based on the contracted hours worked in the last pay period ending on or before 30 October 2020.

Employees on variable hours – usual hours will be based on the average hours worked between the start of the 2020/21 tax year (e.g. 6 April) and the day before their furlough period begins (again these dates are inclusive). Although the paper does not say that you should take the starting point as the date they commenced employment if this is later than 6 April, one would assume this to be the case.


If an employee was employed and on the payroll on 23 September 2020 but was subsequently made redundant or stopped working for their employer after this date, they can be re-employed and will be eligible to claim for under the extended scheme. The employee must have been included in an RTI submission to HMRC between 20 March 2020 and 23 September 2020. This also applies to employees on fixed-term contracts who were employed and on payroll on 23 September but where subsequently that fixed-term contract expired.

Shielding/Sickness absence/Childcare

The policy paper states that employees can be put on furlough where they are unable to work because they:

  • are shielding in line with public health guidance (or need to stay at home with someone who is shielding)
  • have caring responsibilities resulting from coronavirus, including employees that need to look after children

If someone is off sick and employers want to furlough employees “for business reasons” they can furlough the person on sick leave, but they can’t be on SSP and furlough at the same time.

Restrictions on employees during furlough

Under the extended scheme the position remains that while on furlough the employee must not do any work for the employer, but they can:

  • take part in training
  • volunteer for another employer or organisation
  • work for another employer (if this would not put them in breach of their employment contract)

Claims under the original and extended scheme

The last date for claims up to and including 31 October remains 30 November.

Claims can be made under the extended scheme from 8 am on Wednesday 11 November. The minimum claim period remains 7 days (but there’s no minimum furlough period).

Claims relating to November 2020 must be made by 14 December 2020. For future claims relating to subsequent months, claims for each month should be submitted by day 14 of the following month. For example, a claim covering the 17 - 27 December needs to be submitted by 14 January.

Citation with you every step of the way

We’re following the situation closely and sending out exclusive updates to our clients via email, so keep an eye on your inbox for the latest information. Plus, log in to your Atlas account to find new template letters for putting your employees on furlough.

If you want to speak to one of our experts, you can call our advice line on 0345 844 4848.

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