The World of Work by Harry Sherrard

Will employers be forced to return furlough monies if they have been used to pay employees notice pay?

An article in The Telegraph published on 4th July 2020 has led to a lot of speculation about whether employers can claim monies for notice pay under the Government Retention Scheme. The article included the sensational heading:

“Employers may be forced to return cash to taxpayer as Sunak redefines furlough.”

Unfortunately, this article led to further news outlets also ‘running’ with the story. Yahoo Finance quoted “Employers who laid off workers after furlough may have to return cash.” Essentially, the articles suggest that in scenarios where employers have made redundancies or terminated an employee’s employment, any furlough monies claimed to contribute towards notice pay may have to be repaid to HMRC.

The articles stem from a recent semi-legislative Treasury Direction, dated 25th June 2020, which informed HMRC how to operate the Furlough Scheme. However, in our view the interpretation of this Treasury Direction by the media is hugely unhelpful, alarmist and factually incorrect.

As it stands, the Government’s position is that the furlough scheme should be ‘used by the employer to continue the employment of employees.’ During a notice period, employees are continuing to be employees. As such, there is no reason why employers cannot use furlough monies to pay notice pay, where furlough leave and the notice period run concurrently. Of course, the same would not apply if employees are paid a lump sum in lieu of their notice.

Whilst it is arguably against the spirit of the scheme, based on the wording of the current Government Guidance, HMRC will have great difficulty if they intend to claim any notice monies back from employers.

The above being said, given that the Government is coming under pressure from unions and other bodies to reconsider their position with regards to furlough and notice pay, and there is a possibility that they could change their position in the coming months. However, we do not believe HMRC would be able to re-claim any furlough monies used to pay notice from employers if this is actioned prior to any legislative amendment. In other words, retrospective amendments to how furlough pay works are highly unlikely.

We will continue to keep you updated on general employment law news and any news linked to the coronavirus pandemic via regular blogs and our YouTube channel. Click here for our YouTube channel and watch the latest videos on updates during the crisis.

Meanwhile, if you would like further information on any of the topics detailed in this blog please email or call the office on 01273 834120 to talk to a member of our team.

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