New legislation will ensure furloughed employees receive statutory redundancy pay based on their normal wages, rather than the reduced furlough rate, it has been announced.
The change comes after reports of some employers using the temporary rate to calculate redundancy packages.
Under the Coronavirus Job Retention Scheme (CJRS), workers who are put on furlough as a result of Covid-19 disruption are entitled to receive 80 per cent of their salary, up to a maximum £2,500 per month.
But new legislation – in force from 31 July 2020 – will ensure workers who have recorded at least two years’ continuous service and are made redundant are entitled to a statutory redundancy payment that is based on their length of service, age and usual pay, rather than the furlough rate.
The new laws will also apply to Statutory Notice Pay – where employees must be given a notice period before their employment ends. During this notice period, employees must be paid based on their normal wages, rather than the furlough rate.
The legislation will also apply to cash awards for unfair dismissal.
Commenting on the announcement, Business Secretary Alok Sharma said: “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.
“New laws coming into force today will ensure furloughed workers are not short-changed if they are ever made redundant – providing some reassurance for workers and their families during this challenging time.”
Starting this month, businesses will be offered £1,000 for every furloughed employee who remains continuously employed through to the end of January 2021.
For Coronavirus Job Retention Scheme (CJRS) support, please get in touch with our expert team today.