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Flexible furlough: Tips on working notice periods and bonuses

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16/07/2020
We’re two weeks into flexible furlough allowing those on standby to come back to work part-time. Here’s what you need to know about notice periods and discretionary bonus payments.

Flexible furlough means those on the government’s Coronavirus Job Retention Scheme (CJRS) can come back to work on a part-time basis, for any amount of time.

While the added flexibility gives staff a chance to dip their toes back into the working environment, there are probably questions surrounding existing contracts and whether this group will be included in company-wide bonus payments.

In our latest furlough Q&A, Kate Palmer, associate director of advisory at Peninsula, shares the following points:

Q) Does the usual/existing notice period remain during furlough?

A) Employees can be made redundant while on furlough and, according to government guidance, their usual periods of notice should apply as per their contract.

As usual, employers can seek to pay the notice period in lieu if they choose to, however calculating the amount of notice pay can be complicated for furloughed staff.

The safest and most straightforward option is to pay furloughed staff their notice pay as per their standard, pre-furloughed rate. In this way, employers can avoid staff potentially claiming they have been underpaid at a later date.

Q) Should furloughed workers be included in bonus/benefit schemes?

A) Guidance on bonuses during furlough can be confusing. However, it does seem that discretionary commission, bonuses and other payments are not included when calculating pay for the government grant. That said, all elements that employers are obliged to pay their employees, such as wages, past overtime, fees, piece rate payments and compulsory commission payments can be included.

When taking into account discretionary bonuses, by definition it is generally down to employers if they choose to pay them. For example, if a bonus can be paid due to a specific target being met, staff will be unable to work towards this bonus if they are not working at all.

However, care should still be taken in these situations. If a bonus has been paid regularly, and staff have come to expect it, they may be able to argue that a custom and practice has been established for the provision of this bonus regardless of the situation.

Q) Is there a chance my firm may not pay my furlough wage due to mistakes?

A) Fundamentally, employers must be processing their claims correctly. Calculating how much of the government grant they are entitled to can be difficult, especially in situations where staff work irregular hours or are being brought back to work as part of flexible furlough. Confusion can also arise when calculating the length of one claim period, as only one claim can be made per period, so all furloughed employees need to be included.

Going forward, funding from the government is to change, which is likely to cause further confusion for employers. If they feel they are struggling, employers must seek further advice. It should be remembered that, even if mistakes go under the radar now, HMRC is being granted additional powers to look into past discrepancies in the claims. If found, employers could find themselves paying back significant furlough funds, even if this was because of an honest mistake.

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