You may be aware (or you may get employees asking you questions) that there was a press release late last week https://www.gov.uk/government/news/new-law-to-ensure-furloughed-employees-receive-full-redundancy-payments that the BBC & other media grandly announced meant that all employees would now get full redundancy pay if furloughed.
Well…we don’t know what other HR advisors have been saying to their clients but if you have found yourself in the sad position of needing to make redundancies whilst staff are furloughed and have consulted us then you will already know that of course redundancy pay must be based on full pay (up to the statutory cap of £538 ) so there are no changes needed for you there.
The press release does also mention notice pay and I have now read the new Statutory Instrument https://www.legislation.gov.uk/uksi/2020/814/introduction/made relating to notice pay in furlough and it is as we had hoped and not as the press release sort of implied. Which is that again nothing has changed if you have been following our advice to date!
The rule has always been that anyone getting statutory notice when their employment is terminated (i.e. one week per year of service) must have that topped up to 100% even if they have been on furlough at 80%.
The issue is therefore around contractual notice if that is more than statutory requirements.
The Employment Rights Act (ERA) 1996 sections 88-91 https://www.legislation.gov.uk/ukpga/1996/18/section/87 define a weeks’ pay that is due during notice and in most cases (even if an employee is off sick or on any kind of parental leave) that would be normal contractual pay. But Section 87 of the ERA (see yellow highlight below) has always explicitly stated this does not apply if the employment contract gives employees at least one week more notice than their statutory entitlement. Hence we have been advising that if your contract gives this additional amount of notice period then you can pay that notice period at the furlough rate.
87Rights of employee in period of notice.
(1)If an employer gives notice to terminate the contract of employment of a person who has been continuously employed for one month or more, the provisions of sections 88 to 91 have effect as respects the liability of the employer for the period of notice required by section 86(1).
(2)If an employee who has been continuously employed for one month or more gives notice to terminate his contract of employment, the provisions of sections 88 to 91 have effect as respects the liability of the employer for the period of notice required by section 86(2).
(3)In sections 88 to 91 “period of notice” means—
(a)where notice is given by an employer, the period of notice required by section 86(1), and
(b)where notice is given by an employee, the period of notice required by section 86(2).
(4)This section does not apply in relation to a notice given by the employer or the employee if the notice to be given by the employer to terminate the contract must be at least one week more than the notice required by section 86(1).
Having now read The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 – this states that employees are entitled to be paid according to Sections 88 & 89 of the Employment Rights Act (ERA) 199 which says they should get a normal week’s pay when on notice (i.e. not a reduced amount) as explain above BUT nothing in these new Regulations amends Section 87 of the ERA (yellow highlight above) that says if your contract gives employees at least one week more notice than they are entitled to by statute then Sections 88 & 89 of the ERA don’t apply.
So basically – all is as it was if you were doing it right in the first place! As far as we can understand it, you are ok to pay furlough pay during notice to any employee who gets at least one week more notice in their contract than the statutory entitlement of one week per year of service.
If this changes any further we will of course let you know but there are two things that currently mean you don’t need to worry hugely:
- Nothing in this new Statutory Instrument currently applies retrospectively – so if they do amend it further it should only apply to cases going forward
- The remedy for an employee would be to go to tribunal for a unlawful deduction from wages – and if that was upheld you would only have to pay what the court decide you were due to pay in the first place anyway – there are no compensatory awards made in those type of claims