Statutory Notice or Contractual Notice – Do you Know the Difference?
There appears to be confusion among some of our customers regarding the difference between Statutory and Contractual notice when making people redundant. There is no case law, given this emerging topic, but my much respected network of Barristers and QC’s believe as follows:
Statutory Notice accrues in line with completed service, so nothing is paid in the first 30 days of employment, then one week’s notice is given up to two years’ service. This increases by a week for every further completed year of service up to a maximum of 12 weeks. For example, someone with 20 years’ service would still only receive 12 weeks statutory notice.
Contractual Notice is subject to Contract. It is often more than the statutory amount and what is offered to the employee at the time of recruitment or promotion, and documented in their Contract of Employment or an Addendum to Contract or letter confirming the change. For example, where someone is entitled to eight weeks Statutory Notice, but has three months Contractual Notice, the higher amount is what should be paid when serving notice, i.e. three months in this case.
So, during furlough leave we believe there are three options. I will continue to demonstrate this using the above example:
- Pay the notice pay at 100% of contractual pay, and recover the 80% / £2,500 cap (while it is available) for all of the contractual notice period, i.e. 3 months. This is deemed the no risk strategy.
- Pay only the 80% / £2,500 for the 3 months. This is deemed the higher risk strategy and likely to result in a claim, thought to be in line with the next option.
- Pay the statutory notice of 8 weeks at 100% of contractual pay and the remaining 4 weeks at 80% / £2,500 furlough pay. This is in line with how pay is treated when people are sick or injured during their notice period.
The contractual pay in this example is static, but if pay is variable with say commissions or bonuses being received, then the pay would be the average of the last normal 12 months of working.
If you need further information regarding this, please contact us on 03456 122144.
Director, Employment Law