COVID-19: New law to protect redundant furloughed employees

On 30 July 2020, Government announced that new legislation will be published to further protect furloughed employees who have been made redundant.

  • The legislation “The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020” was published later the following day and took effect from Friday 31 July 2020.
  • It is aimed at providing further protection to employees and will ensure that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate.
  • 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.
  • The Regulations set out how a week’s pay is to be calculated in the case of an employee who has been furloughed under the Coronavirus Job Retention Scheme (“CJRS”) for the purposes of calculating:
    • any statutory remuneration for time off to look for employment or arrange training
    • any statutory notice payment
    • any statutory sum resulting from a failure to provide a written statement of reasons for dismissal
    • any statutory sum resulting from a failure to comply with an order for reinstatement or re-engagement
    • any statutory compensation for unfair dismissal, and
    • any statutory redundancy payment
  • Business Secretary Alok Sharma said:

“New laws coming into force 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.”

  • Other changes coming into force will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.
  • HMRC have stated that the Regulations do not impact any enhanced redundancy pay that may be stipulated in the terms and conditions of an employee’s individual employment contract but applies to the basic statutory redundancy pay entitlements.

See the policy paper here.

Aspire Comment

The release of this legislation provides further evidence that employers will not be scrutinised for failing to retain an employee’s position once they return from furlough. Although HMRC has stated that the majority of employers have paid the correct redundancy pay, it is aware of employers who have paid the incorrect pay. It is imperative that employers are aware of the new law to prevent an employment tribunal in the future.

As HMRC start their CJRS compliance investigations, companies do not want to fall short on their failure to pay the correct redundancy payments after having accurately calculated their claims and acting compliantly throughout.

If you need any support with redundancies or these ever-changing furlough rules, please call us today on 0121 445 6178.

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