Redundancy and statutory notice payments for furloughed staff are to be calculated using their “normal” pay, not furlough pay, says Baines Wilson LLP’s Employment Team – Tom Scaife, Joanne Holborn and Caroline Rayner.
The Department for Business, Energy & Industrial Strategy has announced that from 31 July, furloughed employees who are being or have been made redundant will have their redundancy payments and (where relevant) statutory notice pay calculated by reference to their normal pay i.e. as if they had not been furloughed.
Statutory redundancy payments are calculated by reference to “a week’s pay”, which sounds simple but follows a complicated formula set out in the Employment Rights Act that differs depending simplistically on whether an employee has fixed hours/salary, fixed hours/varying pay or no normal hours.
The catchy titled Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 modify the usual rules for calculating a week’s pay. They are horribly complicated but ensure that employees receive payments due to them as if they had been working (and paid accordingly) instead of being furloughed. Needless to say there are some complications, including for example in relation to zero/variable hours employees – a week’s pay for them will be the pay that their furlough pay is based on but disregarding the 80%/£2500 cap.
Note that the new rules also cover unfair dismissal compensation and various other entitlements – so it will be like furlough was never a thing!
If you have any queries, please contact our Employment Team on 01228 552600 or 01524 548494.
