The third national lockdown and extension of the furlough scheme

19 January, 2021

We look at the implications for employers of the third national lockdown which was announced on 4th January 2021 and in particular the extension of the furlough scheme during this period and beyond. The furlough scheme is now due to run until 30th September 2021.

The legal framework for the third national lockdown is the Health Protection (Coronavirus, Restrictions) (No. 3) and (All Tiers) (England) (Amendment) Regulations 2021. These regulations come into force on 5th January 2021 and are due to expire on 31st March 2021.


Working from home

The Regulations make it a criminal offence for anyone to leave their home address without a reasonable excuse, and set out a list of exemptions which will amount to a reasonable excuse. One of these exemptions is if it is “reasonably necessary … to leave or be outside [the person’s] home  …for the purposes of work …, where it is not reasonably possible for [the person] to work… from home”.

The “not reasonably possible” test is a high threshold to meet, and it is not sufficient that the employee cannot work as efficiently from home. The wording of the regulations is stricter than the Government’s previous guidance in October 2020 which referred to people who cannot “work effectively” from home.

Businesses which normally operate from office premises are as a rule best advised to close their offices for the duration of this lockdown and to require their staff to continue working from home, particularly where they were able to do so during the lockdown between March and June.

The regulations set a similarly high threshold for the holding of any work meetings without breaching the restrictions on gatherings of two or more people. Here the wording of the relevant exemption is that the gathering would have to be “reasonably necessary for work purposes”.

It is planned that the stay at home order in the Regulations will no longer apply from 29th March 2021.


Business closures

The Regulations impose requirements to close premises and businesses which are ‘restricted’ or providing a ‘restricted’ service. These include all shop businesses except for delivery services and click-and-collect operations, unless the shop falls within the list of businesses permitted to remain open such as food retailers and pharmacies.

There are similar restrictions requiring the closure of hospitality businesses such as restaurants, cafes and pubs, and of a wide range of entertainment, leisure and sports venues, except for a limited number of exempted activities.

Breaches of these restrictions are offences punishable by fines or the issue of a fixed penalty notice. Directors and managers may be personally liable where an offence is committed by a body corporate such as a limited company, if the offence is committed with their consent or connivance or due to their neglect.


Extension of furlough scheme

The Government has extended the furlough scheme (Coronavirus Job Retention Scheme) for the duration of the national lockdown, and in the Budget on 3rd March 2021 the Chancellor announced a further extension of the furlough scheme until 30th September 2021.

Employees on furlough continue to receive 80% of their normal wages, subject to a maximum of £2,500 per month.

The employer’s contribution to furlough costs are currently limited to employer National Insurance contributions (NICs) and pension contributions. These arrangements will continue until 30th June 2021. For an average claim, employer’s NICs and pension contributions account for 5% of total employment costs, or £70 per employee per month.

From 1st July 2021 the employer will be required to pay 10% of employees’ wages and the Government support will decrease to 70%. From 1st August until 30th September 2021 the required employer contribution will be 20%, with the Government support at 60%.

Time will tell whether this tapering-off of the furlough scheme will avoid a cliff-edge for employers as the furlough scheme comes to an end, and the extent to which the ending of the scheme will trigger a surge in redundancies and unemployment.

All businesses which have a UK bank account and PAYE scheme are eligible for the extended furlough scheme, whether or not they have previously accessed the furlough scheme (subject to some restrictions for publicly funded employers).

For periods ending on or before 30th April 2021 all employees will be eligible for furlough provided that they were on the employer’s PAYE on or before 30th October 2020 including a RTI submission to HMRC by this date.

For periods starting on or after 1st May 2021, employers can claim for employees who were employed on or before 2nd March 2021, as long as they have made a RTI submission to HMRC between 20th March 2020 and 2nd March 2021 notifying a payment of earnings for that employee. They do not need to have previously claimed for an employee before 2nd March 2021 to claim for periods from 1st May 2021 onwards.

The option of flexible furlough continues to be available under the extended furlough scheme, so that they continue to work some of their normal hours (for which they are paid as normal) and the employer claims under the furlough scheme in respect of their unworked hours. Any pattern of reduced working can be supported in this way.

Employers should check carefully whether they can rely on existing written agreements with their employees to continue furlough arrangements for the new lockdown, or whether they will need to implement new agreements.


When the furlough scheme ends

The extended furlough scheme is now due to end on 30th September 2021. It is unclear at this time whether there will be any transitional support for employers and employees when the scheme ends.

Back in 2020 the Government announced a Job Retention Bonus scheme, under which employers who retained a previously furloughed employee would qualify for a £1,000 bonus. The Government cancelled this scheme in November 2020 with the promise that it would introduce a new retention incentive scheme at the appropriate time.

It is similarly unclear at this time whether the Job Support Scheme (JSS), which was due to start on 1st November 2020, will come into effect on the expiry of the extended furlough scheme, or if this scheme has been abandoned. Under the JSS an employee would receive two-thirds of their pay for unworked hours provided they work at least 20% of their normal hours, subject to a 5% contribution by the employer. Where the employer’s business is legally required to close under local Tier 3 restrictions, the employee would receive two-thirds of their normal pay, without the employer being required to pay towards wage costs.


Vulnerable employees

The Government has published new guidance on shielding clinically extremely vulnerable people, such as those undergoing cancer treatment or with severe respiratory conditions such as cystic fibrosis, severe asthma and severe COPD. These indivduals are “strongly advised” to work from home. If they cannot work from home, they are advised that they should not attend work for the period of the lockdown. Employers should place these individuals on furlough leave where they are eligible. Other people who live with clinically extremely vulnerable people can still attend work if they cannot work from home.

Employees who are clinically vulnerable but not extremely vulnerable, such as those with chronic heart disease or pregnant women, are not given separate guidance beyond the advice to be especially careful to follow the rules, minimise contact with others and observe good hygiene.


Please contact our employment team for advice and support on any of these issues, or if you have any queries.