Redundancy pay safeguarded for furloughed workers

From 31st July, a new law means that employees who are furloughed and face losing their jobs will be eligible for a redundancy pay-off based on their normal wages – not their furlough salary.

According to the Government only a small number of businesses had taken advantage of the current crisis to pay a lower rate.

Business Secretary Alok Sharma said that the new law had been introduced to ensure employees will receive the full pay-off they are entitled to.

Employees being made redundant who have more than two years continuous service are usually entitled to receive a statutory redundancy payment based on length of service, age and pay – up to the statutory maximum.

However, many of the 9.5 million furloughed employees in the UK are receiving 80% of their normal salary.

Mr Sharma said: “The Government is doing everything it can to protect people's livelihoods. New laws will ensure furloughed employees are not short-changed and are paid their full redundancy pay entitlement - providing some reassurance in an undeniably testing time.”

Furlough scheme ends 31st October

Under the furlough scheme, the Government has paid 80% of employees’ salaries – capped at £2,500 a month. However, from August employers will have to pay Employers National Insurance (NI) and  employers pension contributions.

More changes will follow in September, when employers must pay 10% of furloughed staff salaries, plus NI and pension contributions.

The Job Retention Scheme ends on 31st October and, for this last month, employers must pay 20% of salaries, plus NI and pension contributions.

Employees’ rights protected

Also protected by the new legislation is statutory notice pay, which can range from at least one week to 12 weeks – depending on an employee’s length of service. During the notice period, employers must pay their works.

The new law stipulates that notice pay be based on normal wages and not lower amount they may have received under the Coronavirus Job Retention Scheme.

Other changes being introduced will see basic awards for unfair dismissal cases being based on full pay rather than furlough scheme wages.

“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,” added Mr Sharma.

Date published 31 Jul 2020 | Last updated 31 Jul 2020