COVID-19: Making furloughed employees redundant

  • On 10 July 2020, government updated the Coronavirus Job Retention Scheme (CJRS) guidance to reflect the changes for employers who plan to make a furloughed employee redundant.
  • The Employers guidance has been amended to state the following:

“Where you must make redundancies, you should do so in accordance with the normal rules. This includes giving a notice period and consulting staff before a final decision is reached. You can continue to claim for a furloughed employee who is serving a statutory notice period, however grants cannot be used to substitute redundancy payments.”

  • The Employee guidance has also been updated to reflect this.
  • This confirms that employers can continue to claim under the CJRS for a furloughed employee who is serving a statutory notice period.
  • This indicates that employers should not be penalised for failing to retain an employee’s job after placing them on furlough, consequently making them redundant.
  • Nevertheless, this still begs the question of what should happen if an employee’s contractual notice period entitlement is longer than their statutory notice period.
  • Many contracts of employment will state a longer contractual notice entitlement than the statutory notice entitlement, which is one week per every year of service up to a maximum of 12 weeks, as stated in section 86 of the Employment Rights Act 1996.
  • The changes to the guidance should not cause confusion where an employee’s contractual notice entitlement matches their statutory notice entitlement.

Aspire Comment

It is important to remember that this ‘guidance’ is only ‘guidance’. The Treasury Directions put in place are the legal basis behind the CJRS. Some employers may feel it is more prudent to wait for clearer guidance, or in fact the updated legislation to reflect these recent changes.

Employers should also bear in mind that the guidance and the law are both open to interpretation. Poor drafting will leave huge scope for interpretation, and so it is essential that employers continue to retain all documentation relative to the calculation of the claim and correspondence between furloughed staff. Acting with reasonable care will give you the best defence in the event that HMRC investigate.

If you require further guidance on the CJRS, making redundancies or any other employment tax matters, call us today on 0121 445 6178.

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