Following an amendment to the most recent Treasury Directive, concerns have been raised that employers could be forced to return any payments received under the Job Retention Scheme in respect of termination payments.
The amendment (paragraph 2.2, for anyone keen to read it) simply confirms that any money claimed under the Scheme is to be used to continue to pay employees. So what does that mean in practice?
You can use the Job Retention Scheme for…
Pay for serving out notice on furlough – an employee can serve out their notice whilst on furlough. Where this is the case, you can use the Scheme towards the pay they receive during notice (for as long as the Scheme is available).
There are complex rules around how much pay should be paid to the employee serving notice on furlough (which depends on the terms of their employment contract), so you may need to top up beyond the furlough pay you can recover under the Scheme.
Holiday pay during notice served on furlough – if you’re requiring an employee to take holiday during notice served on furlough, then in the usual way (and for as long as the Scheme is available) you’ll be able to use the Scheme to cover the holiday (although you’ll have to top up the holiday pay to 100% of usual pay yourselves).
You can’t use the Job Retention Scheme for…
Payments in lieu of notice – if you end the employee’s employment with a lump sum notice payment then you are not entitled to recover that payment from the Scheme.
Statutory redundancy payments – it is clear that the Scheme cannot be used to fund statutory redundancy payments. Paragraph 2.2 of the Treasury Directive clearly states that the purpose of the money claimed is to continue the employment of employees and to pay them accordingly.
Ex gratia payments – clearly payments that you’re choosing to make without any contractual requirement to do so, and that aren’t in return for work done, cannot be claimed through the Scheme.
Lump sum payment in lieu of holiday – if an employee has unused accrued holiday entitlement when their employment comes to an end, this cannot be claimed through the Scheme.
There are complicated rules around amounts which should be paid to employees on termination – always take advice.