Faced by a barrage of criticism by mayors and local authorities in the areas affected by the government’s new ‘traffic-light’ COVID-19 lockdown restrictions, Chancellor of the Exchequer Rishi Sunak announced a new ‘Furlough 3.0’ at the end of last week for affected areas.  

Under these new measures, the government will pay two thirds of each employee’s salary for six months. 

This re-worked job retention scheme is more generous than the basic Job Support Scheme (JSS), We have written about the JSS here  

In addition to the expansion, the Chancellor also rolled out further local lockdown grants for businesses. 


To be eligible, the employee must be furloughed for periods of at least 7 days at a time, during which they will receive 66% of their wages. Employees are only eligible for this support if they were on the payroll of the employer an included on an RTI return before 23 September 2020. 

The employer will have to pay the employee’s salary plus any employer’s NIC and the minimum employer’s pension contributions on those wages normally. The employer will then claim back the cost of the wages paid from HMRC (capped at £2,100 per month), but not the NIC or pension contributions. 

Who will bear the cost? 

Under the expanded JSS, the cost of keeping the staff on the payroll is split between the government, the employer and the employee, with the employer bearing a relatively small amount of employer’s NIC and pension contributions. 

The employee must give up one third of their wages and will have to agree to that change in their employment contract in writing if they are not already on a zero hours contract. 

The government is effectively covering all of the employee’s pay, (at 67% of the usual rate) just as it did under the original furlough scheme when it covered 80% reducing to 60% in October. 

Will the employer pay nothing? 

The government thinks that around half the employees covered by the extended JSS will not be paid enough to trigger an employer NIC liability, or minimum employer pension contributions to a workplace pension.   

Employer’s NIC kicks in at £732 per month (£8,784 per year), so an employee who normally earns more than £13,176 per year will create a national insurance liability for the employer when furloughed under the expanded JSS on two thirds of pay. 

Workplace pension contributions will depend on whether the individual has been auto-enrolled in the pension scheme or has opted out. Those aged between 22 and state pension age have to be auto-enrolled if they earn £10,000 of more per year. Once in the pension scheme the extent of the employer’s contributions will depend on the rules of the scheme, but a minimum of 3% of the employee’s earnings between £6,240 and £50,000 per year will be typical.  

When will employers get the refund? 

The online portal to claim under the expended JSS will not open until 1 December 2020, so employers will have to use cash reserves, or borrow, to pay their employees’ wages. 

The employer will have to prove that the wages have been paid, by submitting an RTI return, before HMRC will provide a refund of those costs. This is to avoid the instances of fraud and abuse which were apparent under the CJRS.  

The scheme will run for six months from 1 November to 31 March 2021, and will be reviewed by the government in January 2021. It will also be available throughout the UK where businesses are close by regulation. Thus, decisions by the devolved governments to close certain hospitality businesses by law for short periods, will rely on the UK government to support the wages of the employees of those businesses. 

Local lockdown grants 

The Chancellor has also boosted local lockdown grants, which were announced in early September. The grants enabled businesses forced to close to claim up to £1,500 every three weeks. The revised local lockdown grants now allow businesses to claim up to £3,000 per month payable every two weeks. 

However, small businesses with a rateable value of or below £15,000 can now claim £1,300 per month, while medium sized businesses with a rateable value between £15,000 and £51,000 can claim £2,000 per month. 

This is an increase on the £1,000 local lockdown grants that were restricted to small business properties rateable values less than £51,000. 

Previously the local lockdown grant was not designed to support businesses closed by national policies, such as nightclubs. But the new grants will extend to businesses closed on a national level including nightclubs, restaurants, pubs and bowling alleys. 

Unlike Furlough 3.0, which covers the four jurisdictions in the UK, the local lockdown grant is only available in England. However, the devolved administrations will receive a minimum of £12.7bn to support businesses in Scotland, Wales and Northern Ireland. 

SRC-Time are one of the South East’s leading accountancy firms in advising the self-employed and partnerships in all aspects of their tax affairs and we are able to assist in any issue raised above. 

Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at  or speak with an account manager to get any process started. 

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