When an employee is made redundant, they are entitled to receive:
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A Statutory Redundancy Payment (a payment based on their age, length of service, and salary);
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A payment in lieu of accrued but untaken holiday; and
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Notice.
Notice is usually either worked by the employee, paid in lieu (subject to the terms of their contract), or spent of garden leave (again, subject to the terms of their contract). However in these “unprecedented times” of Covid-19, we have a significant number of people who are on furlough, leaving us with a number of questions about how their notice periods should be dealt with:
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Perhaps the obvious first question is “can you make someone redundant whilst they’re on furlough”. The simple answer is yes, however there has been some confusion due to the wording of the scheme which states that it is integral to the scheme that the payment is “used by the employer to continue the employment of employees”. Some have suggested this means that if you’re not continuing an employee’s employment, they cannot be on furlough. That is not correct, there is nothing in the scheme which means you cannot make a furloughed employee redundant.
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Can an employee remain on furlough for their notice period? Yes! HMRC have confirmed that employees who are serving out either contractual or statutory notice periods can remain on furlough, and that the grant can be claimed to pay a proportion of the notice pay (subject to employer contributions at the relevant time).
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If my employee has agreed to accept 80% pay whilst furloughed, do I have top up during the notice period? The answer here is a bit more complex. An employee who receives only statutory notice or less than one week more than statutory notice will be entitled to their normal pay and their normal hours, this includes whilst on furlough, so they must receive 100% pay (their ‘pre-furlough’ pay). An employee receiving more than one week more than their statutory notice is on ‘contractual notice’ meaning that their pay will be governed by their contract. If they have signed a variation of contract to accept a lower salary, then they can be paid the lower salary during their notice whilst they remain on furlough. It should be noted, however, that under The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020, which came into force on 31 July 2020, a statutory redundancy payment must be calculated on the basis of pre-furlough pay. For employees with irregular working hours/pay, this means (in the simplest terms) the payment should be calculated on the basis of the 12 weeks prior to them being furloughed.
If you have any queries regarding redundancy, furlough, or employment matters related to Coronavirus, please do not hesitate to give Charlotte Braham a call on 01494 893529.