Legal briefing | Employment |

Furlough Update: Furlough and Redundancy

Overview

This briefing was updated on 5 August 2020.

Today, the Government has announced a new law which is designed to ensure that employees made redundant during furlough receive statutory notice and redundancy pay based on their full pay, rather than any reduced furlough rate.

Under the Coronavirus Job Retention Scheme (CJRS), employers can place employees on furlough (paid leave) on reduced pay, provided the employee receives at least 80% of their regular wages up to a full-time maximum of £2,500 per month. Subject to some limited exceptions, only employees who had been placed on furlough for at least three weeks prior to 30 June 2020 can be placed on furlough. Government guidance confirms that, although the CJRS is designed to retain jobs, employers can make employees redundant during furlough, subject to the usual rules on redundancy.

Furlough and notice

Today's announcement confirms that, with effect from 31 July 2020, statutory notice pay and statutory redundancy pay for furloughed employees who are made redundant must be calculated based on their full, pre-furlough pay, rather than any reduced furlough rate. The new law will also cover other employment rights that rely on average weekly pay, including unfair dismissal and short-time working.

The impact of the new law on contractual notice pay will depend on the length of the contractual notice period and, in some circumstances, it may be possible to continue to pay contractual notice at the reduced furlough rate.

Government guidance now also confirms that employers can continue to claim under the CJRS for a furloughed employee who is serving their notice period. The employer can claim the Government subsidy during contractual and statutory notice. Where only statutory notice is piad, employers would have to top this up to full pay during the notice period.

Whilst the CJRS can be used to fund notice pay for those remaining in employment during notice, the CJRS cannot be used to fund PILON, redundancy pay, or other termination payments.

Furlough and holiday

With the holiday season upon us, we are seeing a number of queries on the interaction between holiday and furlough. Government guidance confirms that employees can take, or be made to take, holiday during furlough. However, employees are entitled to their pre-furlough, full pay for any holiday taken, rather than any reduced furlough rate. Employers can claim for holiday for furloughed employees but must top this up to full pay. The guidance also confirms that employees should not be placed on furlough simply because they are on holiday.

Another question we are seeing arise is whether an employee who is made to quarantine following a trip abroad can be placed on furlough. This is not covered in the Government guidance. We think, in principle furlough can be used, but only if that employee had been on furlough for at least three weeks prior to 30 June 2020.

Job retention bonus

The Government has announced a job retention bonus to incentivise employers to retain furloughed employees, instead of making them redundant. A £1,000 bonus will be paid to UK employers for each returning furloughed employee who remains continuously employed until 31 January 2021, provided they are paid an average of £520 per month between 1 November 2020 and 31 January 2021. Further details of the bonus scheme and how it will operate are due to be announced tomorrow, 31 July 2020. We will publish updates on our COVID-19 resources hub here.

Despite the bonus, as the CJRS gradually winds down, we continue to advise a number of clients on redundancy and restructuring exercises, as well as a number of other cost saving measures designed to retain staff. For more details, please get in touch with your usual Employment department contact.