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Using furlough to pay redundancy

Using job retention scheme to pay notice periods

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Whislt I understand that the point of the job retention scheme is to keep people in jobs. Is it viable for a company to start redundancy process whilst an employee is on furlough and use the JRS to pay the notice period?

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By tom123
01st Jun 2020 15:37

I don't know - but at the very least (as an employee) I would be expecting it to be topped up to my usual rate of pay.

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By Accountant A
15th Jun 2020 18:24

;oug

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By carnmores
01st Jun 2020 17:13

i agree it can be used to pay notice but that the company should top up the leaving employees pay to pre furlough amounts. there has been comment in the press yesterday and today re this

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By andyscotland
04th Jun 2020 09:33

I don't agree this is an employment law question.

Certainly employment law on redundancy can be complex, and needs to be understood and followed (e.g. on what amount is due to the employee).

But the OP is asking whether - having calculated what pay/notice period is due - they can claim the JRS funding to offset the cost.

The guidance is clear that the employment law aspect of furloughing employees is entirely separate to claiming the grant. The only relationship is that to claim the grant the employee must do no work and must be paid at least 80% of their usual pay.

So it doesn't seem to exclude claiming for a period when someone is also on notice. It's also notable that many of the business groups that were pushing for clarity about the extension of furlough raised the point that they needed to know partly because they might imminently need to start redundancy processes for staff currently on furlough so that they could be made redundant by the time the funding ended. And the government did not appear to challenge this.

It might depend on the overall context.

The guidance says:

"The scheme is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus."

My read is that if you are restructuring and making some redundancies, and that will allow the business to stay viable and protect other jobs then it would be entirely reasonable to claim.

If you are shedding almost everyone but doing so makes it more likely the business will recover and create new jobs in the foreseeable future that might also be valid.

If you are winding up it might be more open to challenge particularly if there is then a surplus distributed to owners/shareholders. If the business has debts and the JRS grant increases the amount payable to creditors then arguably that is still protecting the UK economy and jobs, albeit in other companies.

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By john hextall
04th Jun 2020 10:04

It depends what you mean by viable. Firstly, what people are paid is based on different rules and calculations from what you can claim back from the Government. Secondly, the redundancy process requires a certain amount of consultation, which I don't believe you can do whilst they are furloughed. Thirdly, it is a somewhat distasteful proposal, even if theoretically possible. I suspect that logically, you would have to bring them back to work to begin the redundancy process. If the job was then identified as being no longer required, it would be hard to justify re-furloughing them even though there does not appear to be a technical restriction in the claims process.

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Replying to john hextall:
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By andyscotland
05th Jun 2020 10:26

john hextall wrote:

Secondly, the redundancy process requires a certain amount of consultation, which I don't believe you can do whilst they are furloughed. Thirdly, it is a somewhat distasteful proposal, even if theoretically possible. I suspect that logically, you would have to bring them back to work to begin the redundancy process. If the job was then identified as being no longer required, it would be hard to justify re-furloughing them even though there does not appear to be a technical restriction in the claims process.

There is nothing in the guidance that precludes carrying out redundancy consultations while people are on furlough.

The only restriction is that

Quote:

"You cannot ask your employee to do any work that:

makes money for your organisation or any organisation linked or associated with your organisation

provides services for your organisation or any organisation linked or associated with your organisation.

Consulting on redundancy (whether by email, phone or asking people to come in for a meeting) does not fit either of these restrictions. Bear in mind though that if you ask e.g. Line Managers to organise and run these consultations that would arguably be them providing a service to the business so not in line with the rules if management are also furloughed.

I'm also not really sure what's distasteful about it. So long as the employee gets their legally required redundancy period / pay, why does it matter where the money comes from? Indeed many people have to work their redundancy periods in normal times - being at home on 100% pay, and able to look for and indeed commence a new role, doesn't seem too much of a hardship?

NB I'm not saying redundancy itself isn't a hardship, but if redundancy is happening either way I don't see how the use of the furlough scheme makes it any worse.

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