Covid-19 redundancy guide – Part 6: Notice periods and reclaiming costs

My previous post in this series based on the CIPD’s guidance addressed the issues of redundancy dismissals and payments. This final instalment deals with notice periods, the amounts that employers can reclaim, and the cancelled (for now, at least) Job Support Scheme.

Notice periods

Employees who are made redundant while on furlough are entitled to notice of termination in accordance with their contracts. The government has confirmed that statutory notice pay during the notice period is also payable at the rate of the employee’s full contractual normal salary – not their wages under the furlough scheme.

The latest guidance confirms that, if employers must make redundancies, they should follow the normal rules – including those relating to notice periods and consultation.

Before 1 December 2020, employers were able to claim for a furloughed employee who was serving a statutory notice period. The updated guidance on the extended furlough scheme means that, after this date, employers cannot claim the furlough grant during a furloughed employee’s period of contractual or statutory notice.

Employers cannot reclaim actual redundancy payments or payments in lieu of notice under the furlough scheme. Payments in lieu of notice should be calculated based on pre-furlough pay.

There are some complex legal arguments surrounding notice, especially regarding the distinction between contractual and statutory notice pay.

Reclaiming costs

Even where an employee has been furloughed before being made redundant under the previous furlough scheme, employers cannot reclaim the cost of:

  • statutory redundancy payments
  • contractual redundancy payments
  • payments in lieu of notice or untaken annual leave
  • extra compensatory payments for termination of employment.

Employers are likely to be able to reclaim a portion of:

  • the cost of notice pay for any notice period while on furlough
  • the cost of any annual leave taken during the notice period.

However, as indicated above, claiming the furlough grant during notice periods ends from 1 December. Both of the above items are only claimable for up to 80%, 70% or 60% of salary, depending on the relevant monthly cap.

Holiday pay

Furloughed employees who are made redundant are entitled to be paid in lieu of any accrued but untaken leave (bearing in mind that annual leave continues to accrue during furlough leave).

Employers will not be able to reclaim payments in lieu of annual leave under the furlough scheme. They can claim a furlough grant for the cost of any annual leave taken during the notice period of up to 80% of salary, subject to the relevant monthly cap. Employers will have to top up these leave payments to the rate of the employee’s full pre‑furlough salary.

Job Support Scheme

The government’s Job Support Scheme (JSS) has been postponed until the furlough scheme ends – or perhaps indefinitely. The Job Retention Bonus, which was due to be paid out for employees retained after furlough until the end of January, has been withdrawn.

If the JSS scheme is reinstated, employers should, prior to making any role redundant, carefully assess whether this scheme could provide alternatives to redundancy.

A key difference between the Job Support Scheme (JSS) and the Job Retention Scheme (JRS) is that the JSS will not provide wage assistance for an employee who is doing no work at all.

Neither the employer nor the employee needs to have previously used the JRS in order to use the JSS.

If the JSS is reinstated, employers will need to pay employees for the hours they work. The government will probably set the percentage of time that must be worked. The government will then pay a percentage of employees’ salaries up to a specified maximum. If the scheme is reinstated, it can provide an opportunity for employers with ongoing difficulties or restrictions on normal operations to avoid redundancy. Employers should therefore, prior to making any role redundant, check whether this scheme has been revived and whether it could provide an alternative to a redundancy situation.

For more information about the topics covered above, or any aspect of redundancy during the pandemic, email me or call me on 020 7099 2621.

You can also catch up on my earlier posts in this series here:

Job Retention Scheme and its effects

Redundancy consultations

The need for compassion during redundancy measures

Redundancy selection process and criteria

Redundancy dismissals and payments