Furlough update – redundancy pay, notice pay and compliance
It has been over five months since the government announced the introduction of the Coronavirus Job Retention Scheme (CJRS), allowing employers to furlough employees and claim for a grant to cover a portion of their usual monthly wage costs.
The guidance and rules surrounding CJRS have been released sporadically, with the government trying hard to fill the gaps and keep up with the numerous queries posed by advisers, employers and employees. We provide an update on some of the recent points of clarification below:
Statutory Redundancy Pay
New regulations, which came into force on 31 July, mean that any statutory redundancy pay entitlement (SRP) must be calculated using an employee’s normal pre-furlough wages, rather than any reduced furlough rate.
As most readers will know, employees with more than two years’ continuous service who are made redundant are usually entitled to SRP that is based on length of service, age and weekly pay, up to a statutory maximum. Weekly pay is subject to a cap (currently £538) – the new rules will not remove this cap but will ensure that, as the government states, ‘furloughed workers are not short-changed if they are ever made redundant’.
It is worth noting the following key points:
- if your employees have no normal working hours or fluctuating pay, there are detailed rules that must be followed to determine what the employees’ ‘normal pre-furlough wages’ are;
- these rules only apply to SRP and not to any contractual or discretionary enhanced redundancy pay, which will instead depend upon the contractual terms or the exercise of your discretion (as applicable); anda grant cannot be claimed under the CJRS to cover redundancy payments.
The new regulations referred to above also apply to statutory minimum notice pay, meaning that where an employee is entitled to minimum statutory notice pay they must be paid their pre-furlough rate of pay during statutory notice.
Note however that there is a slightly unusual point of employment law, which means that the rules do not apply in relation to notice given by the employer or employee where the notice to be given by the employer to terminate the contract is at least one week more than the statutory minimum notice. If this does apply to your employees, we suggest you seek advice before determining the amount of notice pay.
Last week, the Association of Taxation Technicians (ATT) reported that HMRC has now issued the first set of compliance letters regarding the CJRS, with the first batch of letters arriving with employers from 18 August.
The ATT reports that HMRC will be asking questions where they have concerns over the validity of claims because, for example, claims have been miscalculated or claims were made for ineligible employees. Their current compliance activity will be focusing on fraudulent claims and not cases where an employer has made an innocent error.
However, in the meantime, if you become aware of an error in any claim submitted to HMRC, you should contact HMRC to correct the position within the specified time period to avoid penalties. Further details can be found here.
And don’t forget…
Changes to the CJRS apply from September, affecting the amount of monthly wage costs an employer can claim for. For September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will therefore pay employer NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
If you have any further questions about the CJRS or the content of this article, the Employment Team at Coffin Mew would be happy to help so please do get in touch.Tags: covid-19, Furlough, Redundancy, Job Retention Scheme, Notice Pay, Coronavirus