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Redundancy Pay and Furloughed Workers

30th July, 2020

The UK Government have today announced that workers who are currently furloughed will be eligible to receive a redundancy payment based on their usual salary rather than the reduced furlough rate.

This law will come into force tomorrow, Friday 31 July 2020. Until now, companies had been advised to pay normal salary voluntarily, but concerns were raised that a number of businesses were not complying with government guidance on the matter. The new law will ensure that employees who are at risk of redundancy receive a full and fair pay out based on their normal salary and not the reduced furlough pay.

Under the furlough scheme, 80% of a furloughed worker’s salary is paid by the Government, up to a maximum of £2,500 per month. Employers can voluntarily ‘top up’ their employees’ salaries to their usual, full salary. The furlough scheme will begin to ‘taper’ from August 2020, seeing the contribution from the employer increasing until the scheme finishes at the end of October.

The BBC have today announced that an ‘estimated 150,000 people have so far been made redundant during the coronavirus crisis’, with the figure expected to rise, particularly at the conclusion of the furlough scheme.

Employees who have been working with their current employer for a minimum of two years are usually eligible to receive a statutory redundancy payment. The amount an employee is entitled to receive is based on a number of factors, including the employee’s age and the total length of service. The calculation utilises the employee’s weekly pay. This legislation ensures that when calculating an employees’ average weekly pay that weeks spent on furlough are treated as if the employee was working and receiving their full pay. Employees may also be entitled to an enhanced redundancy payment depending on the terms of their contract of employment.

Employers now making redundancies must ensure that employees receive their normal pay for any statutory redundancy payments and statutory notice pay.

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