Furlough & Notice Pay

Thursday 28th May 2020

Sadly a number of businesses are starting to consider life after furlough and make decisions about bringing employees back part time or at all – redundancies are therefore at the forefront of a number of business owners’ minds.

Getting the pay right can be tricky especially when employees may have to be made redundant whilst on furlough.

It would appear that an employee can be on furlough whilst in their notice period, therefore can be served notice whilst on furlough.

It is a little bit of supposition and extrapolation. It seems possible under the JRS rules that someone who was on notice when the scheme was introduced could be placed on furlough. There were two considerations – pay and whether the aims of the scheme are met if the costs would be incurred regardless of the pandemic. Provided there is a connection between putting the employees on furlough and the consequences of COVID-19, the purpose of the scheme will be met.

In relation to employees who are already on furlough there is no specific guidance but the same considerations would apply.

The Government may provide more clarity when they announce the details of the post 31 July 2020 changes to the scheme.

What do you pay an employee who is in their notice period and on furlough?

Notice pay will be based on the entitlement under the contract of employment and statutory rights to notice pay – and that is where things can get a little complicated particularly with statutory notice pay. The amount you are legally obliged to pay and the amount you can recover under the scheme may be different.

There does not appear to be any mechanism for employers who dismiss and pay in lieu of notice to reclaim that payment in lieu of notice under the scheme. Therefore, you may not be able to do this but rather you may have to have the employee “work” their notice period instead of course remaining on furlough.

Statutory Notice is one week for the first two years of employment, and then one additional week for each complete year of service up to a total maximum of 12 weeks’ notice.

For example someone who has been employed for 15 months is entitled to 1 weeks’ notice, someone who have been employed for 7 years and 2 months is entitled to 7 weeks’ notice and someone who has been employed for 23 years is entitled to 12 weeks’ notice.

You can give extra notice under the contract of employment. You cannot give less.

Under the statutory notice pay rules where an employee is ready and willing to work; or is incapable of work because of sickness or injury; or absent because of pregnancy, childbirth, adoption, parental, shared parental or paternity leave; or is on annual leave, then they are usually entitled to be paid as normal i.e. full salary/wages (subject to certain calculation criteria) for their statutory notice period provided their contract of employment does not provide for a notice period longer than 1 week greater than the statutory notice period.

So for example if an employee was off sick when they were served their notice and had statutory notice entitlement only then for the notice period they would be entitled to receive their full notice pay rather than SSP. However, if the same employee was entitled to a contractual notice period that was longer than their statutory entitlement by one week or more then they would only be entitled to receive SSP for their notice period, unless the contract provides otherwise.

Employees with normal working hours

An employee with normal working hours and who is only entitled to statutory notice would be entitled to receive their full normal salary for the notice period despite still being on furlough. This would mean that you would have to top up the 80%/£2,500 that you can claim from the Government to 100% of normal pay (before the furlough).

An employee who has a notice period one week or longer than their statutory notice period would only be entitled to receive the 80%/£2,500 (unless you have opted to top this up anyway), unless the contract of employment states otherwise.

Employees without normal working hours

The same principles apply as for an employee with normal working hours save in relation to how you calculate “normal” salary. 

What is “normal” pay?

In relation to employees with normal working hours this is more straight forward – a weeks’ pay for each weeks’ notice (as defined under the Employment Rights Act 1996)

For employees who do not have normal working hours this calculation becomes more complicated and involves calculating an average remuneration over a 12 week period.  

Each contract of employment needs to be carefully reviewed where the notice period is longer than the statutory entitlement for that employee to see what the contract provides for as pay in a particular circumstance such as notice.

For further assistance and guidance please contact a member of our Employment Law Team on 01384 811811 or lawyers@waldrons.co.uk