Furlough Update: Third Treasury Direction and the recovery of notice payments
Jack Harrington

On 26 June 2020, the Third Treasury Direction was published setting out the mechanics of the changes to the Coronavirus Job Retention Scheme (‘the Scheme’) and dealing principally with the implementation of the ‘flexible furlough scheme’ available from 1 July 2020.

However, an amendment to the introduction section of the Scheme as a whole has raised concern over the ability of employers to recoup notice sums paid to employees who are dismissed whilst still on furlough leave.

Crucially, the terms of the third Treasury direction imply that payments obtained through the Scheme must be used ‘to continue employment.’

This suggests that, where employment has been terminated and the employee is working under notice, the Scheme should not be accessed in respect of those employees.

This is contrary to most commentators’ previous interpretation of the Scheme, namely that some element of notice pay could be recovered under the Scheme in many circumstances.

Given that neither the guidance nor the Treasury Direction explicitly exclude notice pay, and the guidance makes it clear that employees can be made redundant whilst on furlough, it seems likely that furlough payments made during the notice period will be recoverable, but the uncertainty is incredibly unhelpful for employers.

Urgent clarification is being sought from the Government but until further guidance is issued, employers need to be aware that there is at least a potential risk that they will not be able to recoup any part of notice sums paid to employees who are dismissed whilst on furlough leave, even if they are required to work that period of notice.

Please do not hesitate to get in touch with us if you have any questions.

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