Furloughed employees will receive full redundancy payments
30 July 2020
In a press release, the Department for Business, Energy and Industrial Strategy (BEIS) has confirmed that the government is bringing in a law that will ensure that furloughed employees receive statutory redundancy pay based on their standard wages, and not at a potentially lower furlough rate of pay.
This will guarantee that those furloughed under the Coronavirus Job Retention Scheme (CJRS) will not receive lower pay in the event that they are made redundant. The amendments are applicable to statutory notice pay and other entitlements.
The laws are being brought in from Thursday 30 July, and will come into force from Friday 31 July. The government has encouraged employers to pay any employees being made redundant on the basis of their normal wage, and not based on the reduced rate of furlough pay. There are many businesses that have adhered to this but there are, unfortunately, a minority who have not. The legislation is being brought in to protect workers and to ensure that any employees being made redundant receive the full amount that they are entitled to.
Any employees who have over two years’ continuous service, and are made redundant are ordinarily entitled to statutory redundancy payments, which are calculated on the basis of their length of service, age and pay, up to a statutory maximum.
Alok Sharma, Business Secretary, said:
“The government is doing everything it can to protect people’s incomes through our Coronavirus Job Retention Scheme, which is now supporting over 9 million jobs across the UK.
We urge employers to do everything they can to avoid making redundancies, but where this is unavoidable it is important that employees receive the payments they are rightly entitled to."
The changes are also applicable to Statutory Notice Pay. Statutory Notice Pay is where employees must be provided with a notice period prior to their employment ending. This can vary from between at least one week’s notice all the way up to 12 weeks’ notice, and this will depend on how long they have worked for their employer. Employees must be paid during this notice period. Again, pay must be based on normal wages, and not those paid under the CJRS. Unfair dismissal cases will also be based on full pay and not wages paid under the CJRS.
The statutory instrument can be found here.
This will apply to employers in England, Scotland Wales (Great Britain) as Employment matters are devolved.
The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.