25/11/2020 – Employer’s cannot claim furlough for employees under notice…and what comes after furlough?
The furlough scheme’s current phase will run until the end of January 2021, and whilst employers can continue to claim 80% of wages up to a cap of £2,500 per month, no claims may be made in respect of any days a furloughed employee spends on notice between 1st December and 31 January 2021.
Periods under notice may not be claimed whether notice was served by the employer or the employee
This new condition applies irrespective of whether the employer served notice (as will be the case with many current redundancy programmes underway), or whether the employee served notice themselves, perhaps to move to a new employer, or to retire.
The higher of statutory and contractual notice is excluded
The rule also applies to statutory or contractual notice, and this is significant, since many employers wrongly assume that the wording in their employment contracts takes precedent. As a practical example a client recently contacted myHRdept believing that their legacy contract, which stated a month’s notice either way, would apply in the case of an employee with 11 years’ service. He was surprised to learn that in that case, the higher statutory notice of one week per year of service, up to a maximum of 12 weeks applied, and his employee was therefore entitled to 11 weeks’ notice. (NB This applies to notice served by the employer – if the employee were to resign, the contractual notice of, in this case, one month would apply.)
Extended furlough scheme – looking ahead
The extended furlough scheme will continue in its current guise until the end of January, with employers able to claim up to £2,500 per month per furloughed or flexibly furloughed employee, and only being responsible for paying employer’s costs for National Insurance and minimum pension contributions.
We suppose that, similar to the first furlough scheme, employers may have to contribute a greater proportion of the costs for employees furloughed in February and March – in the last 2 months of the original furlough scheme employers had to pick up 10% of the cost in the first month and 20% in the second, in addition to employment costs. We have no reason to suppose that employers will be able to claim back furlough pay for employees under notice in February or March, since the core aim of the scheme is to preserve employment, not to fund the ending of it.
Records of agreement for extended furlough scheme
Some of myHRdept’s clients have continued to furlough employees across the old furlough scheme and into the extended furlough scheme, which started on the 1st November. Technically these employees should be the subject of a further agreement to cover the period 1st November – 31st January, but it is entirely possible that many employers may have overlooked this requirement. Whilst no one can know how HMRC is likely to regard such cases, it would seem prudent to hold a record of continuing agreement on file, and to provide furloughed employees with a summary of the furlough rules as they now apply. In the case of retained HR clients, a template for this purpose is available from myHRdept.
Looking ahead, what will follow furlough
On 25th November the Chancellor will announce a series of initiatives to encourage employment, ranging from substantial investment in the UK’s infrastructure, to financial support for employers to hire apprentices, and tailored help for the longer term unemployed to find a job.