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Understanding the furlough scheme

The furlough scheme was introduced in the UK to help prevent mass redundancies. However, the scheme is set to finish in October…so what happens next?

Elizabeth Cromwell


Empty jar on a table with the word Savings stuck to the glass

The scheme covers full-time, part-time, flexible, zero-hour and agency workers, as long as they were on their employer's PAYE on 19 March 2020. According to HMRC statistics, the total number of jobs furloughed as of August 2nd was 9.6million. 

The government’s furlough scheme pays employees 80% of their monthly wage, up to a maximum of £2,500 a month. Those on the scheme must be furloughed for a minimum of three weeks, though they can be put back on the scheme multiple times once registered (registrations closed in June). If your wage varies from month to month, it’s down to your employer to calculate your average wage, which is what your furlough pay should be based on. 

Employers can choose to top up the extra 20% of your wage if they want to; however, this is not mandatory. 

What will happen after the scheme ends in October?

Even though the scheme was introduced to avoid the number of unemployed people rocketing, many people were, unfortunately, let go from their jobs at the beginning of the pandemic. More continue to be made redundant whilst on the furlough scheme and the government is worried that once the scheme ends there will be a further rise. 

In an effort to help employers keep their employees in work when the scheme ends, the government have pledged to pay businesses £1,000 for every furloughed employee they keep in work until the end of January. However, to be eligible for this money, the previously furloughed employees must receive at least £520 a month from their employer between November and January. 

If you were in the unfortunate position of being made redundant during furlough, and you qualify for redundancy pay (i.e. you worked for your employer for more than two years), your settlement should be calculated using your typical pay, i.e. your pre-furlough wages. New laws have been brought in to enforce this after a few firms were found to be basing their calculations on employees’ furlough pay.

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