Calculating notice pay for employees on furlough

Employees with a garden leave clause in their contract, could argue they're entitled to 100% pay.
Photo: Anita Gellatly / Shutterstock

The Coronavirus Job Retention Scheme (CJRS) was created at such speed that it created many unanswered questions. The government has addressed many of these each time it releases a new iteration of the guidance. But, as Daniel Barnett examines, there is still an unclear issue.

From the past six versions of the government’s CJRS guidance for employers, we now know that TUPE applies, that employees can take holiday pay, how the training provisions work, and what the position is of company directors.

But what about notice pay? If an employee has agreed to accept 80% of their salary while on furlough, is their notice pay also paid at 80%, or does it revert by operation of law to 100%?

We know that over 4 million employees were reported as furloughed in the first week of HMRC’s online portal being open. If one tenth of those are made redundant when the scheme ends, that is 400,000 employees on furlough receiving notice payments. On an average salary of £30,000pa, and (say) an average notice period of four weeks, the difference between 80% and 100% is £461 per employee – or £184 million among 400,000 employees.

The technical legal position

The first question is: how much notice is the employee entitled to receive under their contract?

If they are entitled no more than one week’s greater notice under their contract than the statutory minimum notice period, then s87(4) of the Employment Rights Act 1996 gives them rights to minimum pay during their notice period. That is a “week’s pay” for every week of notice. Even that is not straightforward. The Employment Rights Act 1996 sets out several methods for calculating it, depending on whether the employee has normal working hours, and whether their pay varies with the amount of work done. Depending on the situation, the minimum guaranteed notice rights could be anything between 80% and 100% of normal.

If they do not qualify for minimum guaranteed notice rights, then their pay during a furloughed notice period will be whatever they have agreed to receive while on furlough – often 80% of normal salary subject to a £2,500 per month cap.

Example 1.
Kate has worked for her employer for 2½ years. Her contract says she is entitled to receive one month’s notice. She has agreed to accept 80% of normal pay while on furlough. Because she has worked for 2½ years, her statutory minimum notice period is two weeks. Her contractual notice period, one month, is at least one week more than the statutory minimum. Accordingly, s87(4) results in her not being entitled to statutory minimum notice rights, and her notice entitlement while on furlough is one month at her current contractual entitlement, i.e. 80% of normal salary.

Example 2.
Dave has worked for his employer for 15 years. His contract says he is entitled to three months’ notice. His statutory minimum notice is 12 weeks. He is given three months’ notice on 27 February 2020, which expires on 26 May 2020.  That is a contractual notice period of 12 weeks and 6 days. 12 weeks and 6 days is not at least one week more than his statutory minimum notice (12 weeks), and so he is entitled to statutory minimum notice pay, which may be a figure between 80% and 100% of normal salary depending on the method of calculation.

Will tribunals follow that approach?

It is counterintuitive to allow employers to “get away” with paying less than normal notice pay during a notice period, because an employee was willing to forego part of their normal salary in an attempt to help their employer remain solvent and save their jobs.

There are a number of ways that a tribunal might (and probably will) ensure that employees receive 100% of their notice pay even if furloughed.

First, if an employee has a garden leave clause in their contract, and they are under notice, they could argue (with some force) that they are entitled to their normal garden leave pay, typically 100%. After all, they are on notice and being told not to do any work for their employer, which is exactly what garden leave is. This will be quite a compelling argument where a garden leave clause exists, but that will not be the case for many or most employees.

Second, a tribunal could imply a term that the employee’s agreement to reduce salary to 80% was only while they were not under notice, perhaps because the Coronavirus Job Retention Scheme is there to preserve, not remove, jobs.

The flaws in this argument are that (i) such an implied term would be inconsistent with the expressly agreed term to reduce salary to 80% during furlough; and (ii) that the CJRS does, in places, contemplate jobs ending due to redundancy while somebody is on furlough.

Third, for some (not all) employees who (i) are entitled to guaranteed minimum notice pay; and (ii) work normal working hours and their remuneration does not vary with the amount of work done, they can rely on a section in the calculation of a ‘week’s pay’ which refers to calculating pay as ‘if the employee works throughout his normal working hours in a week’, to mean they should get the amount they would normally get if they were not on furlough.

In my view, tribunals are likely to use one of these routes to ensure employees receive 100% of pay during notice, notwithstanding the very real problems with each of the first two.

What if employers get it wrong?

If employers pay 100% when the employee is strictly only entitled to 80% of salary while under notice, the employee is unlikely to complain. In theory, if the employer subsequently ceases to trade, an administrator or liquidator might seek to set those overpayments off against any other liabilities to the employee – but that is unlikely.

If employers pay 80% (or between 80% and 100%), as the orthodox view suggests, and a tribunal or court later rules that full salary ought to have been paid during notice, the employee will have a claim in the tribunal or civil courts for the shortfall. An employer which wants to rely on a post-termination restrictive covenant will find itself unable to do so, if it has dismissed the employee in breach of contract by underpaying notice pay.

Daniel Barnett

About Daniel Barnett

Daniel Barnett ( is a barrister at Outer Temple Chambers in London, and one of the UK’s leading experts in dealing with the employment law consequences of the CJRS. He helps hundreds of HR professionals each month through and is the resident lawyer on LBC Radio.

41 Responses to Calculating notice pay for employees on furlough

  1. Avatar
    Alex Tinson 30 Apr 2020 at 6:23 pm #

    Does this still apply if the employee had been employed for less than a year?

    • Avatar
      Kaz 30 May 2020 at 5:03 pm #

      Was jhst going to ask that

  2. Avatar
    John S 1 May 2020 at 1:42 pm #

    Good afternoon

    My employer furloughed me mid March and then made me redundant. The boss has stated that I will continue to receive my reduced furlough pay during the notice pay rather than the full pay I would normally have received had I worked out the notice period. Is this correct? Can one be simultaneously furloughed and under notice for redundancy?

    • Avatar
      Imran 27 May 2020 at 6:04 pm #

      I have just received same news. I think companies are using this government scheme to suit themselves. We were all being made redundant before scheme came out. I do think companies like mine have planned this so they don’t pay so much money out on notice pay. In reality this is a job retention scheme, and for them to use government funds to pay us 80% notice pay is disgusting. They won’t even dig into there own pockets to pay staff. This makes me think that these big companies made so much money and are so tight they relying on free grants. This is a strategy for them to say we are keeping you all for now but later as you agreed to being furloughed we will save money at the end.

      • Avatar
        Kaz 30 May 2020 at 5:37 pm #

        I totally agree i work for a recycling company i was furloughed on the 23rd march and still furloughed 10 weeks later had the letter to say im currently furloughed until srated otherwise, however on my letter it said that they were going to have no option but to permanently close some sites, im in a meeting and exec centre however i have since found out my director and execs have been in the office working i definitely think they already know ti get rid if some of the office minions to keep there huge salaries and keep there jobs my company are minted . I want to know now so i can start hunting down another job so i dont have to wait for the inevitable to happen in 1/2/3 months down the line i have a morgage bills to get sorted and my firm are only paying me 80%

      • Avatar
        Jeremy Couplan 1 Jun 2020 at 1:18 am #

        Agreed. I see a flaw in the Furlough scheme. All ok at 80% assuming the employer is planning on carrying on in business after the Furlough ends, no doubt extremely helpful whilst there are few or no orders. However, the Furlough monies should not be used if redundancy notice is on the cards. It should be the employer who pays wages fully knowing their staff are no longer needed. Using the Tax payers money to ride a storm with Redundancy at the end is completely wrong, and I’d say the Gov have missed a trick in this case.

    • Avatar
      deb lewis 4 Jun 2020 at 3:13 pm #

      Having handed in my notice after being put on furlough, my contractual 2 months notice is being paid at 80% of my usual wage. my employer is insisting that this is ‘the rules’ as I chose to hand in my notice. I have been employed for 21/2 years.

  3. Avatar
    Priyanka 4 May 2020 at 9:43 am #

    I have similar situation as John, is that a legal thing to do by employer as we are under garden leave in that case.

    • Avatar
      Tee 14 May 2020 at 4:22 am #

      Priyanka i’m going to speak with acas tomorrow to clarify this – in my head what you say is correct, if they make us redundant, then they are in territory different from furlough, ie garden leave. I guess if we get made redundant, furlough can’t be a thing as it’s only garden or Pilon that is relevant at the point where we get a finishing/redundancy date.

      I’ll post any updates here of course.

      • Avatar
        Andrew Yates 17 May 2020 at 5:02 pm #

        I received my furlough pay on 15th May for 40 days of being furloughed. In my calculations my average daily pay after deductions was £104. I got paid £36.99 per day. I have asked how they came to this outcome and they will not tell me. Is there someone I can complain to.

        • Avatar
          Amanda Daniels 26 May 2020 at 1:04 pm #

          Andrew it sounds like someone is trying to pull a bit of a fast one on you. If they are calculating that 80% of your salary equates to £36.99 per day that would put you on an annual salary of just over £12,000 gross (before deductions). Your calculation of a daily rate of £104 net and assuming this is 80% furlough payment would be roughly £34,500 per annum. Furlough is capped at £2500 per month which is £30,000 per annum and that would break down to around £92 per day after deductions.

  4. Avatar
    Paul 4 May 2020 at 5:46 pm #

    I have the same question as John S – can my employer make me redundant whilst I am furloughed and use this furlough time as my notice period? Doing so would surely mean the government would be paying my notice and it doesn’t cost my employer a penny to get rid of me?

    • Avatar
      Kaz 30 May 2020 at 5:26 pm #

      Correct especially if like me you have been with your enployer under a years service they can just pay furlough then ger rid

  5. Avatar
    Bob Marshall 7 May 2020 at 5:33 pm #

    Hi there,

    I am 59 years old in Scotland & my employer, with whom I have been permanantly employed for over 12 years, requested that I agree to being put on 80% Furlough pay from 1st April 2020, as an alternative to redundancy due to a significant reduction in planned work in 2020 (60-70%), which I accepted, as it was stated that “..if we cannot secure an agreement with you to agree to furlough, we see no alternative but to proceed with substantial redundancies”- the company did not offer to pay the 20% shortfall or offer to give a reason why they wouldn’t, which I understood they were obliged to do ?

    Within the same letter/agreement it was also advised that “Unfortunately, we have now been forced to commence a process of consultation on redundancies.”

    Anyhow, shortly after I accepted to be put on Furlough Leave, they then applied a “temporary” 3 month variation in salary only for those staff still working (April, May & June), reducing hours from 40 to 35 p/week plus a 10% pay cut, subject to review.

    The company subseqently advised all those staff in identified positions at risk, including me that the 1st Collective Consultation on redundancies would commence on 28th April (30 days as redunancies are between 20-99).

    My contract states my employer is required to give me 12 weeks notice to terminate my contract & as my post is one of those at risk my concern is as follows:-

    I have been advised that any redundancy pay would be caculated on my contractual rate if I were not on Furlough.

    If I am subseqently made redundant either during Furlough or after Furlough ends, my current understanding is that my redundancy pay should be calculated on my pre-furlough salary, despite those non-furloughed staff still working, having accepted a “temporary” variation to hours + pay cut, however there is no clear guidance within the Job Retention Scheme guidelines?

    Can you please advise me asap ?

    • Avatar
      Gareth Stone 20 May 2020 at 11:03 am #

      Hi I am in a similar position, have you had any clarification yet?

  6. Avatar
    Nick 7 May 2020 at 5:41 pm #

    Hi, I am in the same situation as John S but my company decided to top up the difference to get the full salary. My question is that, is it right for the company to use the taxpayers money to pay my notice? On the GOV websites states that grants should not be used as substitutes for redundancy. I’m under 2 years so not entitled to redundancy but paying my notice kind of sums up to the same thing.

  7. Avatar
    Martin Robson 14 May 2020 at 9:57 am #

    From the other side, my employee has just given me 1 month’s notice (he has been working 2 years and 51 weeks), and is returning from Paternity Leave on Monday. If I place him on Furlough Leave (I believe we are cntractually entitled to do this) must I pay him full pay or could we reduce his salary to 80% like all of our other furloughed staff.

  8. Avatar
    Christopher 15 May 2020 at 11:25 am #


    I am not too sure if this is connected but this thread is the only one I can find that is similar in nature to my situation.

    I am currently on furlough (1st April), I have been given another job how however due to there being a conflict of interest I do not think I will be able to work for the new company and my current company, simultaneously.

    My notice period is 4 weeks. When I hand my notice in, should I expect 100% or 80% pay?
    If it is 80%, what about my holiday pay, as I have been made to take 2 weeks off @ 100% so will my remaining holidays be at 100%.
    As my company is classed as essential but my position in the company was not, if they ask me to work my notice in the office, can I decline as I was not considered essential before handing in my notice?
    I have a 2 month old child and the risk of contamination in my job is high, as it is impossible for us to work more than 2m apart.

    Any and all help would be greatly appreciated.


    • Avatar
      Amber 15 May 2020 at 3:09 pm #

      Could you please let me know when you get information about this, as I’m in the same situation – thanks

  9. Avatar
    Andrew Gill 15 May 2020 at 6:16 pm #

    I am also in a similar position we were issued a letter asking us to sign on to the job retention scheme leading with “in order to continue to assist the business and retain employment”.

    I was then made redundant two weeks after returning this letter, my notice period is three months and my salary was substantially higher then the maximum £2500 and my employer is only going to pay me the furlough amount for my notice period.

    This is a very grey area but how can a “job retention scheme” be used to fund a company of significant wealth to terminate employment.

    I do not dispute my redundancy I have a problem with the way the furlough system is being abused.
    Acas are not sure on any of this as it’s all so new.

    Does any one have any information that could help me obtain monies owed from my soon to be previous employment

    Andrew G

  10. Avatar
    Nettie 17 May 2020 at 11:13 pm #

    Hi I was put on furlough leave after signing agreeing I was happy to do this during the COVID-19 duration. My employer has notified me I am now being made redundant 31/5/20 3 days short of my 2 years service, (started 3/6/18), whilst others employed are still continuing on furlough. Also I worked part-time for my employer contract states 16 hours but in light of the minimum wage rising twice she has decreased our hours and only paid us on the decreased hours. Is this fair?

    • Avatar
      Jim 18 May 2020 at 10:05 pm #

      I’m in a similar position, asked to change roles, large salary reduction, otherwise, it sounds like redundancy is on the cards. My 2 years service is 14th August, my notice period is 3 months If I’m made redundant, I assume the 3 months contractual notice that applies to both parties still applies rather than governments week statutory redundancy? I’m not wholly fussed if I only get 80% though my standard monthly salary would be £800 a month more.

    • Avatar
      Stewart 28 May 2020 at 11:16 am #

      Hi Nettie. I am in an almost identical position to you. You may want to check articles regarding Statutory Notice periods. My understanding is that for the purpose of redundancy your statutory notice period (1 week per year worked) should be added to your length of service. Theoretically this would take you past the post to qualify for redundancy. I have my final consultation tomorrow and will be bringing up this point with my employer.

  11. Avatar
    Justine Verwey 19 May 2020 at 3:34 pm #

    these are good questions… anyone answering them?

  12. Avatar
    Shim 21 May 2020 at 7:15 am #

    I was furloughed part way through month. I am paid salary per month and only work three days a week. I have been paid the correct furloughed amount. According to HMRC website method used to calculate salaried workers is salary divided by calender days (including non working days) multiply by 0.80 multiply by furloughed days. This gives you a daily rate. Could someone please help me with my question, does employer pay for each day prior to being furloughed? Even if non working days?

  13. Avatar
    Shim 21 May 2020 at 9:30 am #

    I was furloughed part way through month. I am paid salary per month and only work three days a week. I have been paid the correct furloughed amount. According to HMRC website method used to calculate salaried workers is salary divided by calender days (including non working days) multiply by 0.80 multiply by furloughed days. This gives you a daily rate. Could someone please help me with my question, does employer pay for each day prior to being furloughed? Even if non working days?

  14. Avatar
    Chris Barton 21 May 2020 at 4:00 pm #

    Hi, I am in similar position as many above. In April agreed to be put on furlough for benefit of firm surviving etc. Called at home to say furlough extended to June and then next day extended to August. Day after received notice of potential redundancy. Issue is no one seems to know that as I have been made redundant during furlough period, whether I receive my 3 months notice at pre-furlough salary or based on furlough pay which is less. Any assistance would be appreciated. I have contacted everyone I can think of but the response is ‘it is all very new and not clear’. HELP!!

  15. Avatar
    Shim 21 May 2020 at 7:16 pm #

    Hi Chris, I am in a similar situation to yourself and I’m being made redundant. I have read on HMRC website employers cannot substitute furloughed workers to redundancy.

  16. Avatar
    Chris Barton 25 May 2020 at 4:24 pm #

    Hi, Thank you for your response. I actually phoned HMRC and asked the following.

    Are redundancy payments based on furlough pay or pre-furlough salary. Answer: There will not be clause in contracts because furlough is new. Therefore, redundancy notice pay will be based on standard contractual pay. There is nothing specific on website to look at.

    The reason for furlough was to avoid redundancies so the government are not going to pay to make it cheap for EERs to make staff redundant. I asked HMRC if I could relay this to my employers and they said yes so it must be correct. The third paragraph is my words and not HMRC.

    • Avatar
      Seyse I 27 May 2020 at 4:27 pm #

      Thanks for sharing this information. I am also in a similar situation. My notice period is 3 months. According to my employer, my notice period will be served out as furloughed, there is no defined clarity on whether this would be paid at 100% or based on furlough, which is significantly lower. Unfortunately, getting through to HMRC is very difficult at the moment.
      Would appreciate further clarity on HMRC stance on this.

  17. Avatar
    Adam 26 May 2020 at 5:26 pm #

    Hey, I’d like to ask about how should I give my notice to my employer whilst on furlough. I am about the leave the UK for an indefinite period in the next 6 weeks.
    I am required to give 1 month’s notice to my employer.

    Can they simply say, “alright, you are on furlough anyway, no need a month notice, you can go”, or they will still be required to pay me during my “last” month even now, what I am actually at home on furlough?

    Any help is greatly appreciated.

  18. Avatar
    Fred 27 May 2020 at 12:28 pm #

    I have similar issues to above comments. My situation:
    Currently on furlough
    Been in role for less than 2 years
    Due pay in lieu of notice of 3 months
    and also have 9 month non competition agreement in contract.

    I will be made redundant in the next few weeks.
    I am expecting my 3 months to be paid at pre furlough salary which is much more than furlough rate. I agreed to go on furlough but not to be short changed and paid a fraction of what I am entitled to.

    Any advice??

  19. Avatar
    Michelle k butt 28 May 2020 at 4:50 pm #

    I receive furlough but I have never had anything in writing or signed anything,No pay slips off company since febuary,and now been asked to return to work even though my family is high risk,is this illegally wrong

  20. Avatar
    Martin Black 1 Jun 2020 at 8:34 pm #

    Hi all, I’ve just been advised today that my position in under consultation for redundancy (which essentially means i am to be made redundant). I have been on furlough since the end of March. I have been with my employer 2 weeks shy of 9 years.

    I am currently on an 8 week notice period but that would be due to extend to 9 weeks on 13th June. With that in mind, and as i will still technically be under their employ at the 9 year mark, can I expect a redundancy package to reflect 9 years service or 8 years?

    Also, although I am currently on furlough, could they in theory insist I work my notice period should i request a 100% salary for the notice period.

    Thanks in advance

    • Avatar
      Kevt 5 Jun 2020 at 8:51 am #

      Hi I am no expert but your employment ends on the date given as the end of your notice period so if that take you into a new full year then I would assume everything should be calculated at 9 years and not 8. I would chase them under that basis Also notice payment should be 100 percent of normal pay

  21. Avatar
    bea 2 Jun 2020 at 3:15 pm #

    anyone here with info on this situation?

    I work for a London based start-up, and I’ve been employed <2yrs.
    I was first informed about being put on furlough for at least the month of May. 26 days after, Rcvd a phone call informing me I was being let go due to funding troubles and that I will be on 'furlough' for all of my notice period.

    I'm on garden leave till the end of my notice period. This has made me realise that my employers had made up their mind about cutting me off last month, but used the 'furlough' route to reduce their cost. Because, if they had made me redundant on 30th April they would have to pay me my actual salary instead of the reduced amount.

    My immediate action after that call was to look for answers online.
    Are employers allowed to have employees furloughed while in their notice period?
    Shouldn't furlough end when notice period starts?
    Does the CJRS not mention anything about companies claiming benefits while NOT retaining jobs.
    Shouldn't I be getting 100% of my pay during my notice pay, instead of the reduced furlough pay?
    Isn't 'garden leave' same as 'furlough'? on both occasions I'm on the payroll but not allowed to work.

    I am still looking for legally correct answers… maybe the details were missed in the hurry to roll out CJRS.
    I do acknowledge that the scheme was introduced with good intention by the government, but I'm saddened at the realisation that businesses have jumped at it for the wrong reasons. And the objective of job retention is lost.

  22. Avatar
    Phillip Wade 2 Jun 2020 at 9:23 pm #

    We need an answer to this now!!!

  23. Avatar
    Loo 3 Jun 2020 at 1:41 pm #

    If staff have been given notice whilst being furloughed and are then paid 100% pay during the notice period (per contract etc), is that employer then still allowed to claim 80% from HMRC CJRS or once given notice they can’t claim anymore ??????

  24. Avatar
    LEP 3 Jun 2020 at 9:09 pm #

    Advice to HR from legals is to pay all notice whether worked on furlough or in lieu at 100% salary to avoid risks of claims

  25. Avatar
    JohnW 4 Jun 2020 at 1:48 pm #

    Hi I have just been told that my job is likely to be made redundant and a final decision wiil be made next week following a meeting today. I currently am furloughed receiving 80% of my wages. I am salaried and work regular hours. I have been at the company for Just over 7 years and my Contract states a weeks notice for each year. I am 57 years old. I am therefore assuming I will be entitled to the equivalent of 1.5 x 7 weeks pay as redundancy plus notice pay for 7 weeks. My question is should I be paid in full for this? In addition I have 28 days holiday per year and during the period 6 April to the end of July (the likely redundancy date) I have taken none and so should I also receive holiday pay for approx 9 days too? Many thanks in advance for your help.

  26. Avatar
    Loo 4 Jun 2020 at 2:46 pm #

    100% notice has been paid to staff given notice whilst they are on furlough but can the CJRS furlough claim be made to HMRC for 80% of this or should it not? Thanks

Leave a Reply