Is an employee entitled to their normal full pay during the notice period if they are made redundant while on furlough?

Where an employee who is on reduced pay during furlough is given notice of redundancy, the question arises as to whether they should be paid their normal full pay or their furlough pay during the notice period. There are a number of factors that make this a complex question.

One relevant factor is whether the employee is "ready and willing to work" during the notice period (ss.87 to 89 of the Employment Rights Act 1996). If they are, they are entitled to be paid their normal pay for their normal working hours during the notice period. However, this right does not apply if the employee's contractual notice exceeds their statutory notice entitlement by one week or more. Where the right does apply, the question of whether or not an employee on furlough is "ready and willing to work" is likely to depend on their individual circumstances. Ultimately, this may be something to be decided by an employment tribunal.

There is also the question of what the employee's normal working hours are under the contract in force during furlough. Arguably, the employee's working hours remain the same; they are just not being asked to work them while furloughed. In this case, they should be paid at their normal pre-furlough pay.

The position is different again for employees who do not have normal working hours. Notice pay for these employees should be based on their normal week's pay, which is calculated by averaging out their pay over the previous 12 weeks, including weeks of furlough.

Where the right to a normal week's pay during the notice period does not apply, ie where the employee is not ready and willing to work, or where their contractual notice period exceeds the statutory minimum notice by a week or more, it appears that the employer can continue to pay them at the furlough rate, without topping this up. This will depend on the wording of the contract and any furlough agreement.

Clearly, the question of notice pay during furlough is not straightforward. The safest option for an employer, to avoid any dispute, would be to pay the employee at their normal, pre-furlough rate. Where an employer decides to continue to pay the reduced furlough rate, it should be aware that this may be challenged by employees and it is not yet known how tribunals will approach this issue.

The latest HM Treasury Direction on the operation of the Coronavirus Job Retention Scheme, published on 25 June 2020, has introduced an element of uncertainty as to whether or not an employee can remain on furlough while under notice of redundancy. This FAQ is based on the assumption that they can, but further government guidance on this question is required, see Does placing employees on furlough prevent the employer from making them redundant?.