Furlough redundancy payments confirmed

Thousands of furloughed workers facing redundancy had some good news this week when the government confirmed that a new law would protect their statutory redundancy pay levels.

Usually any employee would be entitled to statutory redundancy pay if they’ve been working for an employer for two years or more. It’s calculated based on their average rate of pay alongside other pertinent factors including their age and length of service.


The average rate being worked out based on their usual salary rate, or if their pay varies, the level for the previous 12 weeks leading up to when an employer tells the employee their position is being made redundant.


Under the Coronavirus Job Retention Scheme (CJRS), there was some concern that as workers would be receiving furlough pay rather than normal pay – which could be 80% of their normal wage – that this would be used to calculate any potential redundancy, meaning they would receive less than they would usually be entitled to.


The new legislation ensures that employers have to treat any weeks an employee has spent furloughed in the 12-week reference period as if they were employed on full pay.


Any enhanced redundancy pay stipulated in their individual employment terms and conditions isn’t affected.


The law also covers all other employment rights that rely on average weekly pay including notice pay, short-time working and unfair dismissal claims. Notice payments and holiday entitlements should also be paid at the normal, pre-furlough, salary rate.


Jenny Graham, Director of Redundancy Assist said: “The vast majority of employers are conscientious and will always do the right thing by their employees, even if they have to make hard decisions on redundancy and staffing levels.


“Survival of their businesses is imperative and some owners and directors will be forced to choose between redundancies for some or the whole business failing – there are many difficult decisions to be made.


“The unprecedented CJRS and other measures have helped businesses keep workers employed in various capacities but as they are being gradually withdrawn from August 1st, the time to make decisions on future staffing has arrived.”


The Business Secretary Alok Sharma MP said: “We urge employers to do everything they can to avoid making redundancies, but where this is unavoidable it’s important that employees receive the payments they’re rightly entitled to.


“New laws coming into force today (Friday 31st July) 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.”


Contact us today if you’re concerned about your redundancy situation as a director or need to make some tough but essential decisions for your business. 


Our experienced, knowledgeable and helpful staff will guide you through your legal responsibilities and also your own rights if you’re a director and an employee of your own business.