Redundancy Pay for Furloughed Employees
With effect from 31 July, furloughed employees who are made redundant will be entitled to redundancy pay based on their normal wages, not their furlough rate.
The government introduced this new legislation because some employers were paying their employees severance payments based on furlough pay (80% of normal pay, capped at £2,500 a month), rather than contractual pay.
Statutory redundancy pay calculations for employees with more than two years’ service are based on average weekly pay over 12 weeks, together with factors such as length of continuous service and the employee's age. Under the new rules, employers must treat any weeks an employee spent on furlough over the 12-week reference period as if they were working on full pay.
The cap on a week’s pay for the purpose of calculating statutory redundancy pay remains £538, so the maximum statutory redundancy payment award that an employee can receive is still £16,140.
Any redundancy payments already made before 31 July will not be covered by the new rules.
Guidance Notes: Alternative roles for redundant employees
Where the redundancy of an employee is under consideration, an employer should consider whether there is alternative employment available for the employee elsewhere within the organisation. New Guidance Notes explain the factors that employers should bear in mind when considering alternative roles for redundant employees or employees at risk of redundancy.
The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.