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New Law to Ensure Furloughed Employees Receive Full Redundancy Payments


A law to ensure furloughed employees receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate, has come into force.

Furloughed employees who are then made redundant will receive redundancy pay based on their normal wage, under the new law being brought in.

Throughout the pandemic, the UK Government has urged businesses to do right by their employees and pay those being made redundant based on their normal wage, rather than their furlough pay, which is often less. The majority of businesses have done so; however, there are a minority who have not.

The Government is bringing in legislation to protect workers and ensure all furloughed employees who are being made redundant receive their full entitlement.

Employees with more than 2 years’ continuous service who are made redundant are usually entitled to a statutory redundancy payment that is based on length of service, age and pay, up to a statutory maximum.

This legislation, which came into force on Friday 31 July, will ensure that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate.

Business Secretary Alok Sharma said:

The government is doing everything it can to protect people’s incomes through our Coronavirus Job Retention Scheme (CJRS), 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.

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.

These changes will also apply to Statutory Notice Pay, which is where employees must be given a notice period before their employment ends, varying from at least one week’s notice up to 12 weeks’ notice, depending on how long they have worked for their employer. During this notice period, employees must be paid.

This legislation will also ensure that notice pay is based on normal wages rather than their wages under the CJRS.

Other changes coming into force will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.

In March, the UK Government established an unprecedented package of support for companies of all sizes across sectors, to protect businesses, jobs and incomes during the pandemic.

Through the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Bounce Back Loan Scheme, more than one million loans have been approved.

The Government has also introduced a new Job Retention Bonus to encourage firms to keep on furloughed workers, with a one-off payment of £1,000 being provided to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021.