The original furlough scheme was due to end in October but it was extended to cover the second lockdown period in England through to 2 December.
However, chancellor Rishi Sunak announced that furlough – the Coronavirus Job Retention Scheme (CJRS) – will now run until the end of March 2021. It will provide 80 per cent of wages for hours not worked, up to a cap of £2,500 a month.
Meanwhile, self-employed workers who were expecting to receive a third grant of 55 per cent of trading profits for November to January (capped at £5,160) will now be eligible to receive 80 per cent of trading profits, capped at £7,500 for the quarter.
This is up from the original Self-employment Income Support Grant (SEISS) extension which was going to cover just 20 per cent of profits up to a maximum of £1,875 before the announcement of a second lockdown in England.
Sunak said: “I’ve always said I would do whatever it takes to protect jobs and livelihoods across the UK and that has meant adapting our support as the path of the virus has changed.
“It’s clear the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support.
“Extending furlough and increasing our support for the self-employed will protect millions of jobs and give people and businesses the certainty they need over what will be a difficult winter.”
As part of the furlough extension, Sunak confirmed there are currently no employer contributions to wages for hours not worked. Employers will only be asked to cover National Insurance and pension contributions for hours not worked.
For an average claim, this amounts to five per cent of total employment costs or £70 per employee per month.
The Treasury added that the CJRS will be reviewed again in January to see whether economic improvements mean employers may need to contribute more towards employees’ pay.
This also means that the £1,000 Jobs Retention Bonus will now not be paid in February as it was set to encourage employers to keep people in work until the end of January.
Since the launch of the financial support schemes, over nine million jobs across the UK have been protected while self-employed people have already received over £13bn. Despite the extension, the three million or so excluded self-employed people will again miss out on the funding.
The chancellor also announced an increase to the upfront guarantee of funding for the devolved administrations from £14bn to £16bn.
This is on top of cash grants of up to £3,000 per month for businesses which are closed worth more than £1bn every month; £1.1bn is being given to Local Authorities, distributed on the basis of £20 per head, for one-off payments to enable them to support businesses; plans to extend existing government-backed loan schemes and the Future Fund to the end of January, and an ability to top-up Bounce Back Loans. Mortgage payment holidays for homeowners has also been announced.