Some confusion has arisen as to whether employers can use the Coronavirus Job Retention Scheme (CJRS) to pay notice pay.
This is as a result of a recent Treasury Direction which stated:
‘Integral to the purpose of the CJRS is that the amounts paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees* in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission.’
(* our emphasis added)
The Direction is provided by the Treasury to HMRC to inform them of how to operate the furlough scheme. It has caused confusion as it was interpreted by some to mean that employers may have to pay back money they had received under the CJRS if, after making a claim for an employee, they subsequently made that employee redundant.
Fortunately, HMRC has now clarified that employers can continue to claim under the CJRS for a furloughed employee who is serving their notice, statutory or contractual. The guidance is available from the GOV.UK website: Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme
It is important to note that the Treasury Direction also confirms that employers cannot use monies received under the CJRS to make payment to employees where they are terminated with immediate effect and paid in lieu of their notice (often referred to as PILON). Instead, their employment must continue until the end of their notice period in order for an employer to make a legitimate claim under the CJRS.
It is also clear that the CJRS cannot be used to pay statutory redundancy payments, which must be funded by the employer in full.
Employers are encouraged to seek advice before commencing a redundancy process. Normal redundancy rules and procedures still apply, employees have protection from unfair dismissal and should receive their full redundancy pay entitlement even if they are on furlough leave.
For more information please contact a member of our Employment Team on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch.