Furloughing for redundancy notice

Aweeze

Hi - I’ve just been made redundant after a good number of years employed with the company. They ignored my repeated requests to furlough me and defer the decision until we knew more about the recovery and whether there could be alternative employment. I think this is personal and will be pursuing a claim but my question is now that they wouldn’t use the furlough scheme to retain me but want me to now agree to them using it to pay my redundancy notice. I can’t find anything or anyone to ask if this is legal? After all it’s a retention scheme not a redundancy scheme! I guess as long as I get paid (it’ll be at 100%) I shouldn’t worry but I consider it to be an unethical use of the scheme. They are also forcing me to use all of my accrued leave which it’s in my contract they can tell me to do but given that I’m already furloughed, can’t go anywhere and the whole idea of asking furloughed workers to take leave so that they don’t come back with loads owing doesn’t apply as I’m not going back. I’d really appreciate thoughts and advice. Thanks. 

Grumpy_chap

I think I read somewhere that CJRS cannot be used to fund redundancy payments, but can't find that now.

It is probably best to focus on your own outcome and the maximum financial settlement that you can receive rather than worry about the legalities of what the company are doing.  That is for them to get right and face the consequences if they get it wrong.

If you start to ask questions about the use of furlough and the company is currently thinking they can use that to fund your redundancy, but then because of your questions realise they cannot, the obvious person to lose out immediately is you.

poppy12345

See link https://www.pureemploymentlaw.co.uk/can-you-make-employees-redundant-during-furlough/

The guidance for employees says:

“Your employer can still make you redundant while you’re on furlough or afterwards. Your rights as an employee are not affected by being on furlough, including redundancy rights.”

So from this we know that employees can be made redundant while they are on furlough, but the employer can’t claim reimbursement under the CJRS for any redundancy payments.

Thrugelmir

Employers can request that holiday leave is utilised prior to the termination date. If holiday pay is paid then it adds yet more cost for the employer. Unfortunately the management run the business not employees. When it comes to structuring the business for the future. 

Grumpy_chap

We have established through the above that the company cannot use CJRS funds for redundancy payments.

I would also like to know whether CJRS funds can be used for notice pay or PILON?  This is a particular question because of the situation my wife currently finds herself in.

Also, is PILON tax free?  I think it used to be, but the rules may have changed.

Semple

Grumpy_chap said:

We have established through the above that the company cannot use CJRS funds for redundancy payments.

I would also like to know whether CJRS funds can be used for notice pay or PILON?  This is a particular question because of the situation my wife currently finds herself in.

Also, is PILON tax free?  I think it used to be, but the rules may have changed.

AFAIK pilon isn't technically part of the redundancy package, and therefore would be subject to usual taxation. 

Jeremy535897

Unfortunately PILON is now taxed (from 6 April 2018). I don't think CJRS can be used for paying PILON, but should be able to cover notice if the employee remains employed (even though it is a bit illogical).

Grumpy_chap

Thanks Jeremy.

prowla

Grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.

ref. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Jeremy535897

prowla said:

Grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.

ref. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Payments for notice aren't redundancy. It is illogical though, because why do you need to work your notice if you can't do any work due to being furloughed? But as you can be made redundant while on furlough, why should it matter whether you are paid furlough for not working a 3 week period when you hope your job will continue, as opposed to being paid furlough for not working a 3 week period (notice) when you know your job won't continue?

Grumpy_chap

I suppose there is a bit of logic that furlough would be available all the while the employer is using it to retain the job, or at least intending to.  Once the notice period has started, the employer is effectively saying that they do not intend to retain the job.

As it is taxable whether paid over the notice period or PILON, it makes no difference to the person being made redundant, so they take the same money and it is up to the employer to get the rules about the CJRS correct.

There could be a counter-productive element from some unscrupulous employers I suppose.  If it is marginal whether they need to make redundancies and the employer realises that if they press the button now they get some of the notice pay subsidised that may be cheaper for the employer than pressing the button when there is no CJRS subsidy.