Last reviewed 1 July 2021

As the UK nations look to ease lockdown restrictions over the next few months, Ben McCarthy, lead researcher and employment law writer at Croner-i, explores the key things to bear in mind for those seeking to make use of the furlough scheme in 2021.

Back in March 2020, the Coronavirus Job Retention Scheme (furlough scheme) was put in place to support employers who were not able to operate as normal due to the pandemic. By designating employees as “furloughed”, employers have been able to recover a portion of employee wage costs from the Government for the time in which they did not work. The cost of the scheme has been substantial, with it now set to last until the end of September 2021.

The furlough grant

Up until the end of June 2020, all furloughed staff were not permitted to conduct any work for their employer or an associated organisation. If they met this eligibility, employers could claim 80% of their wage costs to a cap of £2500 per month, alongside their National Insurance and employer pension contributions. This changed on 1 July 2020, with furloughed staff able to return to work part time if requested by their employer and the Government providing funding for the hours in which they did not work — known as “flexible furlough”. This is to remain an option until the scheme ends in September 2021, meaning furloughed staff can continue to be flexibly furloughed and the Government will fund a portion of their wages for the time they do not work.

From 1 August 2020, funding for the scheme started to change. While the Government still funded 80% of employee wages for the time they did not work, employers were required to pay the employer's National Insurance and pension contributions of furloughed workers' wage costs in relation to the hours that the worker did not work. Employers have continued to pay these costs since then, and will continue to do so until the end of the scheme.

As part of the Spring Budget, the Chancellor confirmed on 3 March 2021 that the scheme would be extended to the end of September 2021. From 1 July 2021, the Government will fund 70% of wages, meaning employers will be asked to top up the remaining 10% so that furloughed employees still get 80%. In August and September 2021, the Government will fund 60%, meaning employers will need to top up the remaining 20%. This is similar to the approach taken by the Government last year, where between August and October 2020 they gradually started reducing their contributions with the aim of ending the scheme completely on 31 October 2020. Although this was later changed when the scheme was extended on that date, they are once again seeking to wind down the scheme gradually this year as coronavirus restrictions are lifted across Britain, hopefully for the final time.

In this time, employers should ensure that they are making accurate claims from the scheme in order to avoid furlough fraud. Furlough fraud is a term used when employers overclaim grant payments under the scheme by either receiving money they are not entitled to from the start or after a change has occurred (eg an employee who is being claimed for is no longer part of the business).

To avoid penalties after having overclaimed under the scheme, employers should correct this error in their next claim, or make a payment directly to HMRC if the employer will not be making any future claims. Employers who have miscalculated the amount they needed to claim under the scheme, and are entitled to claim more, can, again, contact HMRC to amend their claim. This is known as having underclaimed. Employers should note that HMRC have powers to perform additional checks if amendments on underclaimed grant payments are requested.


For periods starting on or after 1 May 2021, employers can claim for employees who were employed on 2 March 2021, as long as they have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee. Employers 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.

Furlough and redundancy pay

Furloughed employees who are then made redundant should receive redundancy pay based on their normal wage rather than a reduced furlough rate, according to a new law which came into force on 31 July 2020. This does not affect any enhanced redundancy pay that may be stipulated in the employees' employment contract; however, it does apply to basic statutory redundancy pay entitlements and statutory notice pay. Employees must be given a notice period before their employment ends, varying from at least one week's notice (after 1 month’s service) up to 12 weeks' notice, depending on how long they have worked for their employer, and should be paid accordingly for this time. While employers can ask staff to receive this payment in lieu, meaning they do not work the time, they should still be paid as though they have worked the notice period in full. (The employees’ employment contract may allow for more notice than the statutory minimum, in which case the contractual notice should be given.)

Claims for the furlough grant cannot be made for any member of staff working any form of notice. This includes notice associated with redundancy or dismissal.

Furlough and working parents

With so many school bubbles currently being sent home to self-isolate, many employees may be wondering if they can be furloughed due to unexpected issues with childcare. The short answer is yes — the furlough scheme can be used for employees who have children self-isolating. However, employers need to remember the purpose of the Job Retention Scheme, ie to help them cope with a reduction in demand due to the pandemic. If they have not seen this reduction, they should not be seeking to use the furlough scheme and may need to consider alternative options.

Furlough and shielding

Clinically extremely vulnerable employees were advised to shield, ie stay at home and take extra care with social distancing, etc. In December 2020, guidance clarified that employers may furlough shielding employees even where they are not closed, or facing a wider reduction in demand. This provides significant flexibility for employers to secure the JRS grant in circumstances where they may not otherwise qualify for it in light of the “exceptional purpose” of the JRS, which is to provide assistance to employers whose operations have been “severely affected” by the pandemic.

Shielding paused in England and Wales from 1 April 2021 and in Scotland from 26 April 2021. However, guidance confirms that clinically extremely vulnerable individuals are still eligible for furlough even when shielding advice is not in place. It also confirms that there is no requirement for an organisation to be closed or experiencing a wider reduction in demand in order to furlough someone who is clinically extremely vulnerable.


As businesses begin to re-open in accordance with the respective Government “out of lockdown” plans in England, Scotland and Wales, employers may find that they are not able to operate on a full scale just yet. The Job Retention Scheme remains in place until the end of September 2021 to offer support while businesses may still be running to restricted means.