Employees who have been furloughed, will be entitled to redundancy pay based on their normal wages and not their furlough rates from 31/07/20.
The Government has claimed numerous companies have taken advantage of the furlough scheme and paid out redundancy payments based on 80 per cent of an employee’s wage. The legislation announced by the Department of Business, Energy and Industrial Strategy (BEIS) means that if you have been working for your company for at least two years, you are owed full redundancy pay regardless of being furloughed or not.
Also, statutory notice pay should be based on an employee’s normal rate as well as any unfair dismissal cases being based on a worker’s full pay.
Alok Sharma, Business Secretary 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.
The Government is doing everything it can to protect people’s livelihoods.
Richard Fox, an employment lawyer at law firm Kingsley Napley, said:
Many employers will have been computing for these purposes at normal rates of pay but some, that are not well-resourced and frankly struggling, will have sought to capitalise on any residuary doubt around this issue. It is right to close this uncertainty down.
It has been estimated that 150,000 people have been made redundant so far during the COVID-19 crisis, however, there is a fear this number will rise significantly once the furlough system ends at the start of November.
The National Institute of Economic and Social Research (NIESR), an independent economic research institute also predicts that the end of the scheme could lead to unemployment hitting 10 per cent before the end of this year (2020).
On 29/05/20 Rishi Sunak, Chancellor of the Exchequer announced that employers will start having to pay towards the cost of the Coronovarius Job Retention Scheme (CJRS), from September companies must pay 10 per cent and then 20 per cent in October of the 80 per cent of wages the furlough scheme entitles to employees.
The amendments to the scheme outline that employers will also pay National Insurance Contributions (NICs) and pension contributions from August onwards. Workers will be allowed to work part-time whilst on furlough from 1st July instead of 1st August which was previously announced. Employers have to pay the full amount of salary for the time worked where the CJRS will cover 80 per cent of the remaining days that did not see the employee at work.
Currently, 9.5 million people are using the furlough scheme which translates to a cost of £31.7 billion for the Treasury.