The Department for Business, Energy & Industrial Strategy has announced this morning (30th July 2020) that it is bringing in a new law to ensure all furloughed employees receive redundancy payments at 100% of their normal pay, rather than a reduced furlough rate.
Throughout the pandemic, the government has urged businesses to do right by their employees and pay those being made redundant based on their normal wage, rather than their furlough pay, which is often less.
The majority of businesses have done so, however, there are a minority who have not.
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.
This legislation, which will come into force from Friday 31 July, will ensure that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate.
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.
At the moment, for example, employees on regular fixed salaries will have all calculations based on their full hours (so 100% of normal pay), whereas employees with fluctuating hours/earnings get 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%. This legislation will ensure that the period used for calculating the average precedes their time on furlough.
Other changes coming into force will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.