Notice pay during Furlough leave

What notice pay is an employee entitled to receive during their notice period if they are given notice of dismissal but remain on furlough leave during their notice period?
The answer depends on whether under the employee’s contract of employment they are entitled to statutory notice only, or at least a week more than statutory notice, and whether they have normal working hours or not.

Under section 88(1), ERA 1996 an employee with normal working hours who is entitled to only statutory notice from their employer (or contractual notice that is less than one week more than statutory notice) will be entitled to their normal remuneration during their notice period, even if they are on furlough leave and therefore on reduced pay at the time notice is served. Provided that they are ready and willing to work. Albeit, that if they remain on furlough leave during their notice period, the employer will still be able to recover their notice pay up to the usual 80%/£2,500 cap.

However, an employee with normal working hours who is entitled to contractual notice of at least one week more than statutory notice will not benefit from the terms of section 88. Their notice pay will instead be based on the pay that they would otherwise have received during their notice. This will be their reduced furlough pay if they remain on furlough for the duration of their notice.

Example: Marianne is entitled to be given 3 months’ notice under her contract of employment. She has 3 years’ complete service meaning her statutory notice would be 3 weeks. Therefore her contractual notice is at least a week more than her statutory notice. She does have normal working hours. This means that she will only be entitled to receive the reduced furlough pay for her notice period.

Payment in lieu of notice
Where an employer makes a payment in lieu of notice there does not appear to be any mechanism for the employer to reclaim the PILON payment under the CJRS even up to the 80%/£2,500 cap. It may therefore be financially preferable from the employer’s perspective to keep the employee on furlough for their notice period so that at least part or even all of their notice pay can be recovered.

For further information contact the team at employmentlaw@woodfines.co.uk

-Maria Gallucci

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