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New rules for redundancy pay for furloughed staff

The government has brought in new laws to ensure employees on furlough are given statutory redundancy pay based on their normal wage and not their reduced furlough pay. 

The changes have been made so employees who have been furloughed under the Coronavirus Job Retention Scheme (CJRS) are not left out of pocket should they be made redundant. The changes only apply to statutory redundancy pay and not any additional redundancy benefits that may be stated in the employees’ contract. Statutory notice pay and other entitlements also fall under the changes and provide some reassurance for those still not back at work. 

Redundancy pay now based on full wage

Before the law was changed, employers who made staff redundant could base any redundancy pay on their furlough wage, which was almost always lower than the member of staff’s normal pay. While the government encouraged employers to base redundancy pay-outs on the full wage, a minority of businesses did not, leaving their staff not only out of a job, but short changed. 

The changes also apply to Statutory Notice Pay. This is where employees are given a notice period of between 1 and 12 weeks, depending on how long they have been at the company, before their employment ends. During the notice period, the employee must now be paid their full wages as opposed to their reduced salary under CJRS. 

Business Secretary Alok Sharma said: “The government is doing everything it can to protect people’s incomes through our Coronavirus Job Retention Scheme, which is now supporting over 9 million jobs across the UK.

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.”

Calculating statutory redundancy pay

Calculating statutory redundancy pay involves inputting average weekly pay against other factors such as length of service and the employees age. You can work out the average weekly pay by adding the pay received over the 12 weeks preceding notice of redundancy and dividing the total by 12 to find the average. These calculations must be based on what the employee would have received if they had not been furloughed. 

If you’d like more information about the new changes to statutory redundancy pay, or further information about how the furlough scheme affects your payroll, speak to one of our friendly payroll experts today. You can get in touch by calling 02382 023223 or by filling in and submitting our online contact form and we’ll contact you.  
 

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