Can someone be furloughed during their notice period and what should they be paid?

31 July 2020

Unfortunately, redundancy during furlough is a topic we are advising a lot of employers about at the moment. (Employers who are dealing with this situation may find it helpful to see our previous article, Can you make an employee redundant during furlough and if so, how?)

Over the past few weeks there has been quite a lot of media coverage regarding whether employees could be furloughed during notice periods and if so, what employees are entitled to be paid. Some of this stemmed from an article in the Daily Telegraph which suggested that employers would be acting in breach of the Coronavirus Job Retention Scheme (CJRS) if they submitted a claim under the scheme in relation to the wages of any employee who was serving their notice period. This was based on interpretation of the guidance on the basis that the wording stated it was “integral” to the purpose of the scheme that furlough money was being used to continue the employment of employees. The rationale was that if someone has been made redundant, the scheme should not be used, because the employment would not be continuing.

This was not our understanding of the scheme, but if this interpretation had been correct, it would have been extremely concerning for the huge numbers of employers up and down the country whose employees had already been furloughed during their notice period for redundancy. There could have been significant amounts which would have needed to be repaid.

Fortunately the Government clarified the position fairly quickly by updating the CJRS guidance. The guidance for employers now specifically states:

“Where you must make redundancies, you should do so in accordance with the normal rules. This includes giving a notice period and consulting staff before a final decision is reached. You can continue to claim for a furloughed employee who is serving a statutory or contractual notice period, however grants cannot be used to substitute redundancy payments.”

The clarification is helpful to establish that the CJRS can be used to cover notice periods. However, it is worth bearing in mind that the employee needs to be serving their notice period, so employers will not be able to make a claim under the CJRS if they make a payment in lieu of notice (where a payment in lieu is made, the employment terminates immediately so the employee is no longer employed during what would have been their notice period). Therefore it is better from the employer’s point of view to keep employees employed (on furlough) during the notice period.

So what are employees entitled to be paid while they are on notice? Well the position on that has still not been clarified. As we covered in our previous article here, the rules are complex, and as furlough is still such a new concept, there is no case law yet to guide us on how the situation would be interpreted. The position may be complicated even further if you have an employee who is on a ‘flexible furlough’ arrangement and is working for part of the time. Our view remains that for the reasons we gave in our article, it would be safest for employers to pay a ‘top up’ to employees who are on their notice period so that they receive 100% of pay for their furloughed hours, rather than the furlough rate. However, it would be worth seeking specific advice about your particular situation.