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CJRS: Claiming for Employees Serving Their Notice

Jul 09, 2020

Although the CJRS has now been extended to 31 October 2020, the government has made it clear that it will expect employers to make a financial contribution towards furloughed employees’ furlough pay from 1 August 2020. Furloughing employees beyond that date will therefore come at a cost to employers and many are considering whether they can afford to retain all employees going forward. 

There may therefore still be fair reasons for employers to make furloughed employees redundant despite the extension of the scheme but the latest (third) Treasury direction appears to introduce a new requirement which is arguably designed to prevent the use of CJRS funds.

Can an employer make employees on furlough redundant? 

We have confirmed in previous bulletins that the Employees’ CJRS guidance states that an employee can be made redundant while on furlough or afterwards, and that an employee’s redundancy rights will not be affected by being furloughed. However, an employer cannot claim reimbursement of redundancy payments under the scheme (Employers’ CJRS guidance). 

The position in respect making furloughed employees redundant and not being able to claim reimbursement of redundancy payments under the scheme has not change, but the latest (third) Treasury direction appears to introduce a new requirement which is arguably designed to prevent the use of CJRS funds to pay employees working under notice.

Claiming through the CJRS for redundant employees

Although the guidance seems to confirm that a furloughed employee may be made redundant, there has been criticism of employers that have taken this approach. The aviation minister, Kelly Tolhurst, suggested in response to British Airway’s decision to dismiss employees on furlough that the Treasury should review the CJRS to ensure that it is not used to pay the wages of employees on redundancy notice (although the criticism may have been based on the fact that it appears that the dismissals were with a view to offering new roles with inferior terms).

On 29 June 2020 the Secretary of State for Work and Pensions expressed similar concern about the use of CJRS funds as a means of paying wages without an intention to keep the relevant employees employed.

The third Treasury direction appears to introduce a new requirement which is arguably designed to prevent the use of CJRS funds in this type of situation. Paragraph 2.2 states that a claim should only be made where the payment will be used to continue employment. This suggests that it would be contrary to the purpose of the scheme to use the funds where employment has been terminated and the employee is working under notice.

The schedule to the third Treasury direction states that the previous Treasury directions continue to have effect subject to the modifications in the schedule. It appears that the Third treasury direction is intended to have retrospective effect, although this is not entirely clear. 

Employers may take some comfort from the comments of the Financial Secretary to the Treasury on 8 July in response to a question in Parliament on this issue. He responded that employers are permitted to continue to claim under the scheme for a furloughed employee where they are serving their notice period.  However, this is not reflected by the wording of the third Treasury direction and has not been expressed in writing by HMRC or the government.

Whereas previously and based on the earlier iterations of the Treasury direction, we would have been comfortable advising Employers that they could continue to claim under the scheme for a furloughed employee where they are serving their notice, we would now, in light of the latest (third) Treasury direction, recommend that Employers intending to use CJRS funds to pay employees working under notice should contact HMRC for guidance and would advise against doing so unless  or until they receive confirmation from HMRC that they can.

Support for Employers

The COVID-19 pandemic and associated furlough scheme continues to present numerous and complex challenges for Employers. 

If you are an Employer and require advice and support on extending full furlough, introducing flexible furlough, or are contemplating a restructure/reorganisation and/or redundancies as a result of the ongoing COVID 19 restrictions, call us now on 0800 612 4772 or Contact us via our website and we will set out clear options for you to help ensure you comply with your legal obligations.

Category

Employment Law Updates

Tags

Coronavirus | Implications for Employers, Furlough Scheme, Redundancy Advice