August 4, 2020

Statutory redundancy payments on termination of furloughed employees

Specialist employment lawyer at Holmes & Hills Solicitors, David Dixey, briefly outlines the new rules regarding statutory redundancy pay for furloughed employees.

The introduction of the Government’s Coronavirus Job Retention Scheme (CJRS, or “furlough scheme”) undoubtedly prevented large scale redundancies in the early days of the Crisis. Although broadly welcomed by employers and employees alike, issues have arisen in respect of payments due to furloughed employees who are unfortunately made redundant.

When proposing to place employees on furlough, employers temporarily varied employees’ contracts and, where possible, obtained the employees consent to these changes affecting rates of pay.

Although urged by the Government not to do so, some employers were relying upon these contractual variations to justify calculating statutory redundancy pay entitlement (and other statutory payments) based upon the employees reduced furlough pay instead of their original full contractual pay.

New legislation from 31st July 2020 requires that employers will need to calculate statutory redundancy pay and statutory notice with reference to the employee’s normal pay and not with reference to their reduced furlough pay.

The Regulations concern “statutory” payments. More favourable, or enhanced, contractual entitlements contained within a contract of employment may still be reduced in line with the contractual variation.

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