31 July 2020

Furloughed employees - new update

The government has announced (30 July) that a new law will be brought in to ensure that furloughed employees who are subsequently dismissed will receive statutory redundancy pay and statutory notice pay based on 100% of their normal wages, rather than on the reduced rate of pay they are being paid while on furlough from CJRS.

In a press release issued today, the government said,

"Furloughed employees who are made redundant will receive redundancy pay based on their normal wage. Throughout the pandemic the government have urged employers to do the right thing, it is acknowledged that the majority of businesses have done so, however there is a minority who have not, this legislation will correct that position".

The calculation of statutory redundancy pay and notice pay is linked to the statutory provisions in the Employment Rights Act (ERA) 1996 that deals with the statutory calculation of a week's pay. Some furloughed employees like shift workers on flexible furlough and workers with no normal working hours on either full or flexible furlough redundancy calculations being based on less than their normal pay.

In addition, an unusual provision in the ERA 1996 has meant that any employee whose contractual notice period is at least a week more than the statutory minimum notice period will be only be entitled to notice pay in accordance with their furlough terms.    

The effect of the new legislation is:

• Furloughed employees who are made redundant will receive statutory redundancy pay based on their normal wage, rather than their wages under the Scheme.
• Similarly, notice pay will be based on normal wages rather than an employee's wages under the Scheme.

It appears that this legislation will not impact on enhanced redundancy pay calculations, unless the calculation of the enhanced redundancy pay is based on the statutory calculation of a week's pay.

If you are part way through a redundancy exercise and have calculated redundancy payments based upon a week's pay at the furlough rate, you will now need to go back and recalculate employees' entitlements and inform any affected employees and any employee representatives if you are engaging in collective consultation of the legislative change. This step will not be necessary if you have chosen to base the calculation of notice pay and redundancy pay on normal pay for all employees, which most of our member employers within the print industry have done or been advised to do by their regional HR advisers.

The detail of the legislation introducing these changes had not yet been published. We therefore suggest you wait until the exact wording of the legislation is available before finalising redundancy pay calculations.