CJRS & Notice PayPublished on: 21 July 2020
We have been asked regularly since the inception of the CJRS whether employees who are furloughed can be made redundant and, if so, whether a grant can be claimed under the scheme to cover their notice periods. The answers have always been, and still are, “yes” and “yes” – despite some speculation in the press and on social media to the contrary.
HMRC updated its guidance on 17 July to expressly state to employers "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."
To be clear, grants under the CJRS cannot be used to fund payments made in lieu of notice: an employee must remain employed and on furlough if the grant is to be claimed in respect of notice pay.
There has been some criticism in the press, including over this past weekend, of employers claiming grants in respect of notice pay, and some larger employers have been moved to state publicly that they will not do so. Other employers who have used, or will be using, the scheme for this purpose have made the point that if they were not to do so, more jobs would be caused to be at risk. Regardless, the fact is that the scheme permits this.
I note that in some of the press reporting on this point, it refers to employers who claim a grant for notice pay having to pay employees in full for their notice periods, notwithstanding that they can only claim a grant for 80% (reducing to 70% in September and 60% in October), subject to the applicable cap (currently £2,500 per month). This is an oversimplification. Where an employee’s pay has been lawfully reduced whilst they are on furlough, a statutory obligation to pay them in full only applies in respect of the statutory minimum element of their notice period, and then only if the contractual notice period is not at least a week longer than the statutory minimum.
The statutory minimum notice period is nil until an employee has been continuously employed for a month, a week until the employee has been employed for 2 years, and then one week for each complete year of service up to a maximum of 12 weeks.
Therefore, if an employee with a contractual notice entitlement of 1 month is made redundant after 4 years whilst furloughed on 80% pay, they will be entitled to full pay for the first 4 weeks of their notice period (because the contractual notice period is longer than the statutory minimum notice period, but by less than a week).
In contrast, if the employee was being made redundant after having been employed for only 3 full years, they would not be entitled to full pay for any part of their notice period because the contractual notice period would exceed the statutory minimum period by over a week.