Protecting Statutory Redundancy Pay under Furlough - Legal Update 31 July 2020

The New Law

In a further unprecedented move and recently announced in response to the current #Covid19 pandemic, the Government has passed emergency legislation to further protect employee’s rights which have been identified as potentially being eroded by action taken by some employers.

Statutory rate

In order to ensure that employees who are furloughed and who are subsequently made redundant, receive their statutory redundancy pay based on calculations using their “normal” wages, rather than any reduced furloughed rate at 80%, the Government has amended the Regulations in the Employment Rights Act 1996 (ERA 1996) by applying an amendment known as the (Coronavirus, Calculation of a Week’s pay) Regulations 2020.

ET Awards

This temporary change applies to the calculation of the basic award for unfair dismissal and also statutory notice pay in the event that an individual brings a claim against their employer and were on furlough at the time of termination.

Take effect today 31 July 2020

The Regulations come into force today 31 July 2020, and modify the calculation of the rate of a week’s pay as originally set out in the ERA 1996, for the purpose of calculating not only statutory redundancy but also other statutory payments.

Normal –v- Irregular hours

Whilst the new statutory provisions are complex, and depend on whether the employee normally has “normal working hours”, or whether their remuneration ordinarily varies with the amount or timing of work done, in essence for those with “normal/regular” working hours, any reduction in how much they are being paid as a result of them being furloughed under the Coronavirus Job Retention Scheme (CJRS) has to be disregard for the purposes of calculating a week’s pay.

If someone does not have normal working hours, a week’s pay is still calculated by reference to their salary without any cap imposed by the scheme, using a reference period pre furlough.

Other statutory rights

The legislation also covers other statutory employment rights that depend on the calculation of a week’s pay such as notice compensation for unfair dismissal.

For further advice on entitlement to redundancy pay whilst on furlough, and during the pandemic please contact a member of our employment team on 020 8363 4444 or complete our online enquiry form.

Please note that our briefings are for informational purposes only, and do not constitute legal advice.

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