New legislation to protect furloughed workers’ redundancy pay

From 31 July 2020 any furloughed worker that loses their job will be eligible for redundancy pay based on their normal wage rather than the reduced rate paid under the Coronavirus Job Retention Scheme (CJRS).

New legislation will ensure that workers get the full rate of redundancy pay after it emerged that a small number of employers had taken advantage of the Coronavirus crisis to pay employees the same rate they received under the CJRS for redundancies.

Employees with two or more years of continuous service that are made redundant 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, many of the 9.5 million workers that have been furloughed under the CJRS are currently being paid 80 per cent of their normal wage, unless their employer has opted to top up their pay.

The new rules on redundancy also apply to statutory notice pay, which covers the period before a worker’s employment ends. This paid notice period typically varies from one to 12 weeks’ depending on an employee’s length of service.

Under the new legislation, notice pay must be based on an employee’s normal wages rather than the lower wages they may have been paid under the CJRS.

The legislation also ensures that basic awards for unfair dismissal cases are based on full pay rather than the reduced wages under the furlough scheme as well.

To find out how we can help with calculating redundancy pay and any liabilities that may arise from it, please speak to our experienced payroll team.