The government has today announced legislation to ensure that furloughed employees receive statutory notice and redundancy pay based on their normal wages, rather than a reduced furlough rate.
Many employees on furlough will have been paid the amount that is recoverable from the government under the corona virus job retention scheme (CJRS), this being the greater of 80% of pre pandemic wages, or £2500, rather than full or usual salary. Statutory redundancy and notice payments are calculated on the normal weekly wage of an individual, based on fixed salary, or if variable earnings a 12 week average. Lower earnings during furlough has led to confusion and dispute as to whether redundancy and notice are calculated on furlough or pre furlough rates.
The press release from the Department of BEIS is clear that the rules will apply from Friday 31st July 2020. This date is significant as due to the CJRS grant no longer covering employer NIC and pension contribution from 1st August, the end of July is likely to see redundancies taking effect. There is no indication that the change will affect redundancies or dismissals which have already take effect.
The new laws will apply to statutory redundancy and notice payments, and any other statutory payments which rely upon average weekly pay. Enhanced payments over and above statutory rates, for example, if an employee has a contractual notice period which is greater than the statutory minimum, or you operate an enhanced redundancy scheme, are a being a matter of contract, on which specific advice should be sought.