Furloughed Employees Will Now Receive Full Redundancy Payments!

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From 30 July 2020, the UK Government has introduced new law to ensure that furloughed employees under the Coronavirus Job Retention Scheme will receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate. 

These changes will also apply to Statutory Notice Pay; this is where employees must be given a notice period before their employment terminates, varying from at least one week’s notice up to 12 weeks’ notice, conditional on how long they have worked for their employer. During this notice period, it is essential that employees are paid, providing some reassurance during this difficult time.

Employees with more than two years’ continuous service who are made redundant are usually eligible to a statutory redundancy payment that is based on length of service, pay and age, up to a statutory maximum. This legislation, which has come into force, intends to safeguard that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate of 80%.

Additional changes coming into force will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.

This legislation does not affect any enhanced redundancy pay that may be specified in the terms and conditions of an employee’s individual employment contract, but applies to basic statutory redundancy pay entitlements.

Ryan Russell, a Partner at MML Legal, has said “I think this is the right decision and will safeguard employee rights. Similarly, employees who are paid off on capability grounds receive notice pay on what a ‘normal’ wage would be averaged out over a period of time and not based on the sick pay. In the current climate, employees should not be financially penalised for circumstances which are wholly out of their control.”

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