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Furlough Scheme and termination

The Coronavirus Job Retention Scheme is winding down. Many employees are facing the increased likelihood that their employment may be terminated in the near future. For those employees who have been furloughed and receiving less than their normal pay, they need to know what their entitlements are for holiday, notice and redundancy payments if their employment is terminated.

Salaried employees

If you did not agree to a pay reduction.

Any holiday, notice and redundancy pay will be made at your normal rate of pay, even if you were furloughed and your employer recovered part of your salary through the Furlough Scheme.

If you agreed to a temporary pay cut, but only whilst furloughed.

Holiday pay should be based upon your earnings prior to furlough. This includes commission and overtime based on your average earnings over the last 12 months.

Your redundancy payment should be based upon your normal, gross weekly pay.

Notice pay may depend upon whether you are still furloughed. If you remain furloughed during any period of notice and you earn a fixed salary each month, you are only entitled to be paid notice at the furlough rate (80% of your salary, capped at £2,500.00. If your earnings vary each month, then notice should be based upon your average 12 weeks earnings.

The rate of pay will also depend on the length of your notice period. If your contractual notice period is at least one week longer than your statutory entitlement (1 week for each year of complete service, up to 12) you are only entitled to be paid at the furlough rate.

If your notice period is the statutory minimum, you could be entitled to receive the ‘minimum guarantee pay’. A guaranteed week pay rate for salaried employment is what you were earning before your notice commenced. For those whose pay varies, the rate of pay is the average of the last 12 weeks of earnings.

Adding further complexity, you may receive a payment in lieu of notice. It is conceivable that a payment of this nature is not wages or salary and as such, is a contractual right. Therefore, you are entitled to your full rate of pay, under your contract, and for those with varying pay, your 12 weeks average. Always check whether your employer has a right to make a payment of this nature, because if not, it could amount to a breach of contract.

If you are not furloughed during your notice period, for example placed on garden leave, you should receive your full rate of pay.

If you agreed to a permanent pay cut.

All of the payments you are entitled to will be paid at your reduced salary. This is because the change is likely to be considered a permanent variation of your employment contract.

Get in touch

If you have been dismissed or have been offered a settlement agreement, then please contact Matthew Warren, Wards Solicitors’ specialist employment lawyer.  Contact Matthew.Warren@wards.uk.com or telephone 0117 929 2811 to discuss your rights and entitlements.

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    January 2021: Covid-19 arrangements

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