New legislation introduced to protect redundancy pay of furloughed workers

The Government has announced that from 31 July 2020 any furloughed worker that is made redundant will receive a payment based on their normal wage rather than the reduced rate of pay they may have received under the Coronavirus Job Retention Scheme (CJRS).

Reports of a small number of employers taking advantage of the Coronavirus crisis to pay a lower rate for redundancies has led the Government to introduce new laws that ensure that workers get the full rate of redundancy pay.

Workers that have more than two years of continuous service are typically entitled to a statutory redundancy payment that is based on length of service, age and pay; up to a statutory maximum of £16,140.

However, under the CJRS many of the 9.5 million workers that have been furloughed are currently being paid 80 per cent of their normal wage unless their employer has opted to top up their pay. This has lead to some employer’s seeking to calculate redundancy pay based on the lower furlough pay rather than their normal pay.  The change in the legislation now prevents this.

As well as ensuring redundancy pay is protected, the new rules also make sure that statutory notice pay, is also to be paid at an employee’s normal wages level rather than the lower wage rate they may have been paid under the CJRS.  You can still keep the employee on furlough during their notice and claim back the CJRS grant, but you will have to top it up.

Furloughed employees that successfully undertake an unfair dismissal claim will also have their basic award payment based on full pay rather than the CJRS’s reduced wage rate under the new legislation.

If you would like advice on redundancy or have questions about the furlough scheme then it is important that you seek professional advice. To find out how we can help, please contact us.