Last reviewed 30 July 2020
Furloughed employees who are then made redundant will receive redundancy pay based on their normal wage, rather than a reduced furlough rate, under new laws coming into force on 31 July 2020.
Employees with more than two 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.
Business Secretary Alok Sharma 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.”
Throughout the pandemic, he continued, the Government has urged businesses to do the right thing for their employees and pay those being made redundant based on their normal wage, rather than their furlough pay, which is often less.
While the majority of businesses have done so, a minority have not which is why the new legislation is being brought forward to protect workers and ensure all furloughed employees who are being made redundant receive their full entitlement.
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.
During this notice period, employees must be paid and this must be based on normal wages rather than their wages under the Coronavirus Job Retention Scheme (CJRS).
It should be noted that the new legislation does not affect 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.
It does however cover other employment rights that rely on average weekly pay, including notice pay, unfair dismissal, and short-time working.
Comment by Kate Palmer, Associate Director of HR advisory at Peninsula
In our experience, employers have already been calculating redundancy pay based on full pay and so this legal clarification just acts to confirm what happens in the majority of cases.
However, legal clarity is always welcomed, especially as employers have all too often, in recent months, been trying to navigate the many grey areas involved in furlough and the Job Retention Scheme.