Please note: The information in this article is correct as of 31/07/20. Due to the ongoing nature of the coronavirus situation, guidance is subject to change and, as such, we would always advise you speak with a solicitor if you are looking for specific advice.

From today, Friday 31st July 2020, furloughed employees will be entitled to statutory redundancy pay based on 100% of their normal wages and not their “furlough rate.”

This new law requires employers making furloughed staff redundant to pay those with more than two years’ continuous service, redundancy pay and statutory notice pay based on their full normal contractual pay.

Business Secretary Alok Sharma has said: “the new law will ensure workers get their full pay-off,” and “it is important that employees receive the payments they are rightly entitled to.“

The Government has made this decision after it became widely apparent that nationally many furloughed staff who had been made redundant were only receiving pay-offs based on 80% of their usual wage because some employers were taking advantage of the crisis to pay staff less than what they would normally be owed.

Up to today employees on regular fixed salaries received redundancy payments based on their normal wage as if they were working full hours (so 100% of normal pay), whereas employees with fluctuating hours/earnings received a payment based on the average of their last 12 weeks’ pay; which, if they’ve been furloughed, is likely to be less than 100%.

To ensure that furloughed employees who are made redundant receive statutory redundancy pay based on 100% of their normal wages; rather than a reduced furlough rate, the Government laid the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 SI 2020/814 before Parliament. The Regulations also apply, among other things, to the calculation of the Basic Award for unfair dismissal and statutory notice pay.

These new regulations modify the calculation of a ‘week’s pay’ which is set out in Chapter II of Part XIV of the Employment Rights Act 1996; for the purposes of statutory redundancy pay and other statutory payments; which include:

  • remuneration for time off to look for employment or arrange training (Ss.53 and 54 ERA)

  • notice pay (Ss.88 and 89 ERA)

  • compensation for failure to provide a written statement of reasons for dismissal (S.93 ERA)

  • compensation for failure to comply with an order for reinstatement or re-engagement (S.117 ERA)

  • compensation for unfair dismissal; and

  • the assessment of whether an employee is to be taken to be kept on ‘short-time’ for a week in accordance with S.147(2) ERA (which applies when the employee’s remuneration for the week is less than half a week’s pay).

Under the new rules, employers must therefore treat any weeks an employee spent on furlough over the 12-week reference period as if they were working on full pay.

Presently, it appears the law does not have a retrospective effect; which could now result in employers having to defend numerous Employment Tribunal cases from former employee claimants whose redundancy pay was calculated by reference to the reduced furlough pay.

If you are an employer and you require advice and/or assistance about redundancy or redundancy pay entitlements; the Coronavirus Job Retention scheme, furlough leave, flexible furlough and/or with notifying and communicating with employees about the above or if you encounter difficulties with employees in this situation, please contact us on 0845 287 0939 or contact us by email.

Farleys Solicitors specialise in employment law & HR for businesses and employees. If you or your business requires HR & employment law advice and support in relation to the current Covid-19 / Coronavirus situation and/or in relation to any other specific area for example; contracts of employment, staff handbooks, absence from work, home-working, apprentices, recruitment, restructures, redundancies, lay-off; furlough leave, short-time working; disciplinaries, grievances, employee exits, settlement agreements; and Employment Tribunal claim or defence and representation.