Furlough: two developments for employers to be aware of

Written on 11 Aug 2020

With many employers now turning their attention to bringing employees back from furlough, as well as considering whether the work environment is ready for their physical return, employers are also assessing the long term viability of these employees' roles and whether redundancies must be considered and consultation commenced. With potential job losses inevitable for some employers and under consideration with many more, the government has recently clarified employees' pay entitlements during notice and for the purposes of other statutory payments such as redundancy and compensation for unfair dismissal. It has also published further details of the Job Retention Bonus (JRB), which it is hoped will encourage employers to retain as many employees in employment as they can.

Job Retention Bonus

The government has provided further guidance on the JRB, with fuller guidance to be provided by the end of September 2020. The JRB was introduced to provide additional support to employers who keep on their furloughed employees in meaningful employment after the government’s Coronavirus Job Retention Scheme (CJRS) ends on 31 October 2020. The JRB provides a taxable, one-off payment to employers of £1,000 for every employee who they previously claimed for under the scheme, and who remains continuously employed through to 31 January 2021. Eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021. Employers will be able to claim the JRB after they have filed PAYE for January and payments will be made to employers from February 2021.

All employers are eligible for the scheme, including recruitment agencies and umbrella companies. A new employer may be eligible to claim the JRB in respect of employees of a previous business which were transferred to the new employer if either TUPE applies, or the PAYE business succession rules apply to the change in ownership. Employees associated with a transfer of business from the liquidator of a company in compulsory liquidation where TUPE would have applied were it not for the company being in compulsory liquidation may also be claimed for. To claim the JRB under these circumstances, the transferred employees must have been furloughed and successfully claimed for under the scheme by their new employer. An employer will not be eligible for the JRB in respect of any employee transferred under TUPE or under the business succession rules after 31 October 2020.

Calculating redundancy payments and notice periods

New regulations are in force which to provide that employees who are made redundant receive statutory redundancy pay based on their normal wages, rather than any reduced furlough rate they have been receiving. These changes also apply to statutory notice pay and other entitlements, in order to 'provide some reassurance during this difficult time' and ensure employees are 'not short-changed if they are made redundant'.

The regulations provide that:

  • Employees who are made redundant will receive redundancy pay based on their normal wage rather than furlough pay. The legislation does not impact any enhanced redundancy pay that may be stipulated in the terms and conditions of an employee's individual employment contract.
  • Statutory Notice Pay, which is the minimum notice period employees must be given to terminate their employment (based on length of service and ranging from one week's to 12 weeks' notice) must be based on normal wages, rather than their wages under the CJRS.
  • Basic awards for unfair dismissal cases will be based on full pay, rather than wages under the CJRS.

Next steps

These two developments come as employers start contributing to the costs of furloughed staff, and which will increase over the next few months. Large-scale redundancies are becoming daily news and the government has sought to stem the tide with its promised JRB, while seeking to ensure that those employees who are made redundant are treated as fairly as possible. It remains to be seen whether the JRB will be a significant consideration for businesses planning their resources over the coming months.