Furloughed employees who are then made redundant will receive redundancy pay based on their normal wage, under new laws being brought in on Thursday.
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. Today the government will bring in legislation to protect workers and ensure all furloughed employees who are being made redundant receive their full entitlement.
Employees with more than two 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 31 July, will ensure that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate.
Business Secretary Alok Sharma said, “The government is doing everything it can to protect people’s livelihoods, and we are supporting more than nine million jobs through the Coronavirus Job Retention Scheme.
“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.
“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.”
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.
This legislation will also ensure that notice pay is based on normal wages rather than their wages under the CJRS.
Other changes coming into force will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.
In March, the government established a broad package of support schemes for companies of all sizes across sectors, to protect businesses and livelihoods during the pandemic.
Through the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Bounce Back Loan Scheme, more than one million loans have been approved.
We have also introduced a new Job Retention Bonus to encourage firms to keep on furloughed workers, with a one-off payment of £1,000 being provided to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021.