Local Furlough Scheme coming to your area

12th October 2020

(Published 9 October and updated on 12 October)

The Chancellor has announced a new local furlough scheme from 1 November 2020 that will allow employees in businesses forced to close due to Covid restrictions to be paid two thirds of their wages.

This is an expansion of the new Job Support Scheme which starts on that date and appears aimed at the hospitality sector..

The local furlough scheme applies where an employer is required to close due to a lockdown, and the government will contribute 67% of normal wages (subject to a cap).

This is different from the normal Job Support Scheme under which employees work a minimum of 33% of their normal hours, and the government pays towards the shortfall in their wages.

There has been disquiet raised over the 67% being less than the 80% payable under the national furlough scheme. This lower amount will be challenging for those on the National Minimum Wage.

The local furlough scheme's official title appears to be: "Job Support Scheme Expansion for Closed Business Premises".

So if a business has to close due to Covid restrictions and people cannot work at all for one week or more, the employer can pay each worker two thirds (or 67%) of their normal salary, up to £2,100 a month – and the government will cover the cost.

However, the government will NOT pay the appropriate Employer NICs and pension contributions. These remain payable by the employer.

The scheme applies to all business premises legally required to close, including including those told to operate on a collection only or delivery basis.

The scheme starts on 1 November and will pay grants from early December.

Three-tier Covid alert restrictions

As regards the government's Covid alert levels announced on 12 October 2020 (Medium, High and Very High), it would appear that a business would have to be in a Very High alert area to qualify for the local furlough scheme.

But a business that is within a High alert area that is not closed down could nevertheless experience a fall in demand due to Covid restrictions - without access to the local furlough scheme reserved for businesses in the Very High alert area, possibly in the next postcode. This could be relevant to a local supplier in a High alert tier to a business in a Very High alert tier.

However, the normal, but less generous, Job Support Scheme would appear to be available to High alert tier businesses, as the scheme applies to open or closed firms.

Details of the local furlough scheme

Under the local furlough scheme, employers are not required to pay wages, only the associated NICs and pension contributions.

Businesses will only be eligible to claim the grant while they are subject to Tier 3 (Very High) restrictions, and employees must be off work for a minimum of seven consecutive days.

The scheme will begin on 1 November and will be available for six months, with a review point in January 2021.

In line with the rest of the new Job Support Scheme, payments to businesses will be made in arrears, via a HMRC claims service that will be available from early December.

Employees of firms that have been legally closed in the period before 1 November are eligible for the national furlough scheme (Coronavirus Job Retention Scheme) currently operating until 31 October.

The local furlough scheme covers any area of the UK that is in lockdown, and the UK government will work with the devolved administrations to ensure the scheme operates effectively across all four nations.

Who is eligible?


  • In line with the rules for the Job Support Scheme already announced: all employers with a UK bank account and a UK PAYE scheme registered on or before 23 September 2020 can claim the scheme. This means a RTI submission notifying payment to that employee to HMRC must have been made on or before this date.
  • This scheme will cover businesses that, as a result of restrictions set by one or more of the four governments in the UK, are legally required to close their premises. This includes premises restricted to delivery or collection only services from their premises.
  • The scheme will pay a grant to the employer calculated on the number of eligible employees who have been instructed to and cease work at the relevant premises. Employers will only be able to use the scheme for employees who cannot work (paid or unpaid) for that employer.
  • Employers must be instructed to and cease work for a minimum of 7 consecutive (or calendar) days. An employee can return to work at a later date.
  • Claims must not overlap and must be made monthly in arrears. These payments will be taxable, and employers will be required to cover employer NICS and automatic enrolment pension contributions in full, where applicable, but are not required to make any further contribution to wage costs. However, employers can top up employee pay if they wish.
  • Businesses required to close as a result of specific workplace outbreaks by local public health authorities are not eligible for this scheme.
  • In line with the rules of the Job Support Scheme already announced, neither the employer nor the employee needs to have previously used the national furlough scheme (Coronavirus Job Retention Scheme),
  • The government is telling employers using the Job Support Scheme not to make dividend payments or engage in share buybacks whilst accessing the grant.

Further details will be set out in Treasury guidance in due course.


  • Where employees receive two-thirds of their wages for time not worked, the grant per eligible employee available from the government is that two-thirds of their normal pay, up to a limit of £2,100 per month. Further detail on how normal pay is calculated will be set out in guidance.
  • The employer can claim under the rules if their premises are closed. When premises re-open, employers can claim under the Job Support Scheme for firms facing reduced demand under the criteria set out for that scheme.
  • Employers will also be able to claim the Job Retention Bonus (JRB) for employees provided they are eligible and were previously part of the furlough scheme (CJRS). Job Support Scheme grants can be used by employers to pay an employee's wages and help meet the JRB Minimum Income Threshold.
  • Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.

What does the local furlough grant cover?

  • The employer must use the scheme to cover their employees’ wages and pay relevant payroll taxes. The whole of the grant must be used to meet employee costs.
  • The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
  • Payments will be made in arrears, reimbursing the employer for the government’s contribution.

How to claim

  • This is a temporary scheme, available to employers from 1 November 2020 for 6 months and will be reviewed in January.
  • Employers will be able to make a claim on a monthly basis online through gov.uk from December 2020 and this will be reviewed in January 2020.

HMRC checks

  • HMRC will check claims. Payments may be withheld or need to be paid back if a claim is found to be fraudulent or based on incorrect information. Grants can only be used as reimbursement for wage costs actually incurred.
  • Employers must agree the new scheme with the relevant staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.
  • HMRC intend to publish the name of employers who have used the scheme, and employees will be able to find out if their employer has claimed for them under the scheme. HMRC will continue to operate a hotline for individuals to make reports of any fraudulent claims they may be aware of. 

Local Restrictions Support Grant scheme

(Updated on 12 October 2020)

In addition to local furlough scheme, the government is increasing the cash grants to businesses in England shut in local lockdowns to support with fixed costs.

These grants will be linked to rateable values, with up to £3,000 per month payable every two weeks, compared to the up to £1,500 every three weeks which was available previously.

This could benefit many businesses, including restaurants, pubs, nightclubs, bowling alleys and many more.

These measures will sit alongside the Job Support Scheme and the £1,000 Job Retention Bonus which encourages employers to keep staff on payroll.

  • Properties with a rateable value of £15,000 or under will receive grants of £667 per two weeks of closure (£1,334 per month).
  • Properties with a rateable value of over £15,000 and less than £51,000 will receive grants of £1,000 per two weeks of closure (£2,000 per month).
  • Properties with an rateable value of £51,000 or over will receive grants of £1500 per two weeks of closure (£3,000 per month).

The government is also extending the grants scheme to include businesses which have been forced to close on a national rather than a local basis.


With more Covid restrictions on the way, there has been frustration amongst businesses that no announcements were made in the recent Winter Economy Plan, which ruled out an extension to the national furlough scheme.

The current national furlough scheme ends on 31 October 2020, to be replaced by the less generous Job Support Scheme, which allows employees who work at least a third of their hours to have their salaries partly paid by the government.

There will be questions with the local furlough scheme over eligibility. What about firms that have remained closed since the March lockdown? Where do they stand?

Presumably there will be some kind of postcode system for this local scheme, which in itself could create problems where two businesses are within a short walk of each other and one qualifies and one doesn't.

The new scheme does not appear to be helpful to employees in sectors which are not closed down, but nevertheless face reduced demand because of Covid restrictions.

Three tier alert regulations

For further help, please check out our Business after COVID-19: Transition Knowledge Hub.


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