Client Update – 3 August 2020
There have been a few updates around furlough over the last few days so felt it appropriate to send through an update to keep you fully informed of any potential changes.
Furlough – the payment of notice pay/redundancy
The Government has announced on 30 July 2020 that they are bringing in a law (full details below), effective 31 July 2020 (although as yet no draft statutory instrument has been seen) which forces employers to pay redundancy at the employees normal weekly rate (capped at £538 per week) and statutory notice at the employee’s normal rate (uncapped) rather than their furloughed rate.
This has been prompted by many employers calculating redundancy based on the furloughed rate, which has taken the employee’s weekly rate below £538 and also paying notice at the furlough rate for those whose contractual notice exceeded statutory minimum notice by at least a week, which has therefore saved employers money.
The announcement says that the legislation will ensure that employees are also paid at their normal salary for ‘statutory notice periods’ and this raises the argument again about whether this will include contractual notice which exceeds statutory. As before, our view is that the definition of ‘statutory notice’ includes contractual notice if it is longer and this is because s86 of the Employment Rights Act 1996 defines minimum notice as ‘not less than one week’s notice for each year of continuous employment’. It may be that, as with the recent confirmation that those on furlough could be given notice while on furlough, the drafting will make reference to statutory and contractual notice, but even if it does not the view is that any contractual notice which exceeds statutory is still caught within the definition of statutory notice.
Details of new law effective 31 July 2020
Further to above, the Government has now published the actual text of the new law on calculating statutory payments for those who are furloughed which comes into effect 31 July 2020. Importantly, this new law does not appear to completely amend s87(4) of the Employment Right Act 1996. This is the section which applies when an employee’s contractual notice exceeds their statutory notice by at least a week and allows an employer to pay notice at whatever the employee’s prevailing rate is at the time (namely the furlough rate in this instance), rather than their normal pay.
Subject to any further clarification, it would now seem that the situation for payment of notice is as follows:
1. Statutory notice (namely one week for every complete year worked) must always be paid at the employee’s normal rate and not the furlough rate.
2. If contractual notice does not exceed statutory by at least a week then any excess contractual notice has always had to be paid at normal rate anyway and this is unchanged.
3. If contractual notice does exceed statutory by at least a week then the statutory minimum notice element must be paid at normal rate and the balance of the contractual notice can be paid at the furlough rate.
More information is now forthcoming on the bonus scheme for bring employees back as outlined below:
Furlough bonus scheme
Details have been published in the last couple of days of the bonus scheme for those employees who have been legitimately furloughed and remain continuously employed as at 31 January 2021 https://www.gov.uk/government/publications/job-retention-bonus/job-retention-bonus
All employers (including recruitment agencies and umbrella companies) can claim £1,000 for each employee legitimately furloughed provided:
- • They earn at least £520 a month on average between the 1 November 2020 and 31 January 2021. Details of what counts towards the £520 will be published in September.
• They must not have been served statutory or contractual notice before 31 January 2021.
New employers can also claim for employees who have TUPE’d before 31 October 2020 and who have been furloughed by their new employer, those returning from family leave or from being a military reservist after 10 June 2020 and who were then furloughed are also eligible, as well as those on fixed term contracts provided they meet the other criteria.
Employers are warned to keep their payroll up to date and address all questions from HMRC about historical claims so as not to jeopardise their claim and must have
- • Complied with their obligations to pay and file PAYE accurately and on time under the Real Time Information (RTI) reporting system for all employees
- • Maintained enrolment for PAYE online
- • A UK bank account
The portal will be open for claims in February 2021.
Isolation when returning from holiday
For those employees that have chosen to holiday overseas the advice remains the same:
Should the country they are visiting become subject to a quarantine on their return to the UK then they would not be entitled to statutory sick pay whilst they isolate (unless they are showing signs of coVID-19 and it is advised by NHS).
Your options as an employer is to offer them to take more holiday (if they have enough) to cover them during their isolation period. For the employee to take it as unpaid or if they are able to, work from home for the duration.
Unfortunately the isolation/quarantine information is changing regularly and the current isolation has been increased from 7 to 10 days in light of the increased cases appearing across Europe.
Thank you to our colleagues at Crossland Employment Solicitors for their guidance.
All information is provided in good faith and correct at the time of issue. It is as always subject to government and treasury guidance and legislation.