New National Lockdown: How will the Furlough scheme change?

The introduction of new UK lockdown measures on November 5 herald yet another period of uncertainty for employers and employees nationwide. New restrictions are forcing many businesses to shut their doors once again, putting the job market under increasing strain.

However, just hours before the anticipated end of the Coronavirus Job Retention Scheme (also known as the Furlough scheme), Chancellor Rishi Sunak announced an extension to the scheme, telling the nation: “we will do whatever it takes as the situation evolves.” The Furlough scheme has provided a lifeline for employers and employees alike during the pandemic, securing approximately 9.6 million jobs for 1.2 million employers.

How will the scheme change?

Between September and October 31, the state paid 60% of wages, with a cap of £1,875 per month. However, with the recent announcement of a new national lockdown, the treasury has proposed a more generous Furlough scheme for employers, reverting to a model closer to that used this spring. Until December, when the lockdown is due to be lifted, employees can receive 80% of their current salary, with a cap of £2,500 in place.

The extended scheme remains ‘flexible’ meaning that employees can work reduced hours, or no hours at all and recover the money for hours not worked. However, employers still must contribute to National Insurance and employer pension contributions.

Am I eligible for the Furlough scheme?

Whether you go on furlough or not is at the discretion of your employer. If they cannot operate their business as usual and decide to keep you on their payroll, they can apply for the grant to cover any hours not worked.

Provided your employer had set up a payroll before February 28, 2020, you can be eligible for the Furlough scheme. There is no requirement for you to have been previously furloughed.

How will the treasury afford the scheme?

The government’s fiscal response to the coronavirus pandemic has been extensive, the treasury having borrowed approximately £208.5 billion since the start of the financial year, approximately 379% higher than pre-pandemic figures had suggested.

This money is borrowed from investors, whether these be pension funds, companies or individuals. However, the amount the government can borrow depends on their ability to repay interest payments.

With interest rates at an all-time low, this debt may accrue at a more manageable rate. However, the growing deficit will likely be repaid through a combination of raised taxes, austerity and increased borrowing.

Chancellor Rishi Sunak said: “I have always said that we will do whatever it takes as the situation evolves. Now, as restrictions get tougher, we are taking steps to provide further financial support to protect jobs and businesses. These changes will provide a vital safety net for people across the UK.”

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This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.


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