New law to ensure furloughed employees receive full redundancy payments
The Department for Business, Energy & Industrial Strategy has brought in a new law effective from Friday 31 July 2020 to ensure all furlough employees receive redundancy payments at 100% of their normal pay, rather than a reduced furlough rate.
The Government announced that throughout the pandemic, the government has urged businesses to do the right thing by their employees and pay those being made redundant based on their normal wage, rather than their furlough pay, which is often less. They acknowledged that many businesses have done so, however, there are a minority who have not.
This new legislation will protect workers and ensure all furloughed employees who are being made redundant receive their full entitlement.
Employees with more than 2 years’ continuous service who are made redundant are usually entitled to a statutory redundancy payment that is based on length of service, age, and pay, up to a statutory maximum which is currently £538 per week.
This legislation will not impact any enhanced redundancy pay that may be stipulated in the terms and conditions of an employee’s individual employment contract but applies to basic statutory redundancy pay entitlements.
These changes will also apply to Statutory Notice Pay, which is where employees must be given a notice period before their employment ends, varying from at least one week’s notice up to 12 weeks’ notice, depending on how long they have worked for their employer. The legislation will ensure that notice pay is based on normal wages rather than their wages under the Coronavirus Job Retention Scheme (CJRS).
Other changes coming into force will ensure basic awards for unfair dismissal are also based on full pay rather than wages under the CJRS.
As the regulations came into force on 31 July 2020, any redundancy or notice payments already made before that date will not be covered by the new rules, meaning that employees who have already been made redundant may have missed out.
If you have any further questions on any of the issues raised above, please contact our employment team at firstname.lastname@example.org for any further advice. This general guidance is correct as of 03 August 2020 but may be subject to change. We strongly recommend that specific advice is sought as needed.