Furlough and Notice
There is currently no explicit Government guidance on furlough and notice pay, however we anticipate that guidance may be released over the coming weeks.
What we know is certain and still in place:
- Employees have the same rights at work and are still entitled to the greater of either statutory notice, or contractual notice (unless being dismissed for gross misconduct);
- Employees are entitled to be paid for notice;
- If an employee is on furlough they cannot work, and need to have agreed to the period of furlough;
- You can make employees redundant while on furlough or after;
- Furlough grant cannot be used to substitute redundancy payments;
The main questions/areas for clarification are:
Can an employee be on furlough and notice at the same time? If so, can you claim back from the grant while an employee is on notice?
Initially my thoughts were no, as the furlough scheme was there to incentivise employers to keep employees in employment. So, it did not seem right that you could claim from the grant if the employee was in their notice.
That being said there is no explicit guidance to say you cannot put an employee on furlough and notice at the same time.
In fact, there is explicit guidance to say you can make an employee redundant on furlough. As a result, claims might be able to be made through the furlough grant for notice pay.
There is also explicit guidance to say that you cannot use the grant to substitute redundancy payments. Redundancy payments would usually mean statutory redundancy payment which is in addition to notice. In the case, the government may intend the meaning of redundancy payments to mean notice payment, therefore implying you cannot claim back notice.
If a claim for notice is submitted, there is a risk that if the claim was investigated it may have be paid back, the guidance is clear that HMRC will continue to monitor after payments have been made.
What amount should the employee be paid for notice if on furlough leave at 80%?
It is possible that future guidance may say that employees need to be given full pay for notice, and also that you cannot claim grant for notice. Currently there is no such explicit guidance (as of 1st May 2020).
That being said, there is a quirk in employment law where the notice pay amount is dependant on the contractual notice. s87(4) of the Employment Rights Act 1996 states that usual notice pay provisions do not apply if the notice given by the employer to terminate the contract is at least one week more than the statutory minimum notice.
In practice, this is how this provision works:
Full pay due: where an employee is only entitled to receive statutory minimum notice (i.e. 1 week in the first two years of employment, with one additional week thereafter up to a maximum of 12 weeks, or 1 week for the employee to serve notice), the employee is entitled to receive their full rate of pay.
Rate of pay actually receiving due: where the contractual notice offers more than 1 week on top of the statutory entitlement, the employee is only entitled to receive what they are earning. This occurs mostly where they are in receipt of SSP and their notice pay will therefore be paid at the rate of SSP.
- The most risk free approach is to pay the full notice and not claim this back from the grant.
- Pay full notice, keep the employee on furlough leave and claim back 80% being aware that there could be a risk of this being rejected.
- The highest risk is to pay notice at 80% and claim the amount back from the grant.
If you have any queries, please do not hesitate to contact one of our experienced Employment Lawyers on 01202 525333 for further advice.