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Statutory redundancy payments for furloughed employees

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Statutory redundancy payments (what the law says an employee is entitled to be paid if they have been continuously employed for 2 years and are made redundant) are calculated based on an employee’s length of service, their age and a ‘week’s gross pay’.

Despite the Government offering a £1,000 job retention bonus to employers for keeping workers previously furloughed employed until 31 January 2021, this is sadly, not enough to justify the costs for some in the current COVID-19 pandemic.

Some employees remain on furlough but risk being made redundant. Many employees have had their wages cut to 80%, in line with the amount employers could reclaim under the Coronavirus Job Retention Scheme (CJRS).

There was some speculation whether furloughed employees made redundant were entitled to statutory redundancy payments based on their ‘’normal’ non-furloughed wages or the 80% reduced rate.

New Regulations came into force on 31 July 2020 to provide that statutory redundancy payments for furloughed employees are calculated based on their ‘normal’ rate of pay.  The Regulations also amend the calculation of other statutory payments such as notice which an employer must give, by law, in some circumstances. They are designed to protect employees who have been furloughed or flexibly furloughed.

A week’s pay is still subject to the statutory cap when calculating such payments. The current cap is £538 per week.

This does not affect contractual or enhanced redundancy payments which will depend on any contractual terms between the employer and the employee.

If you would like to seek advice on any of the issues mentioned in this article, please contact a member of our Employment Team who will be pleased to assist.

Please note that this information is for guidance only and should not be regarded as a substitute for taking full legal advice on specific facts and circumstances.