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New law to ensure full redundancy payments

From today, 31 July 2020, the Government has announced a new law to ensure Furloughed employees receive full pay for any redundancy payments based on their normal wages, rather than a reduced furlough rate. This will hopefully cement the decision employers’ make when making employees redundant, if they were previously unsure. So what is the intention of the new law:

  • To ensure that furloughed employees receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate
  • Changes will mean those furloughed under the Coronavirus Job Retention Scheme are not short-changed if they are made redundant
  • The changes will also apply to statutory notice pay and other entitlements, providing some reassurance during this difficult time.

Employees with more than two years continuous service who are made redundant are entitled to a statutory redundancy payment that is based on length of service, age and pay, up to a statutory maximum. This legislation ensures that employers must treat any weeks an employee spent on furlough over the 12 week reference period as if they were working and on full (100%) pay.

For full details to government announcement:

An estimated 150,000 people have so far been made redundant during the coronavirus crisis, but experts expect the figure to climb much higher, especially after the furlough scheme ends in October.

Earlier this week the National Institute of Economic and Social Research think tank warned that the ending of the furlough scheme could lead to 1.2 million Britons being unemployed by Christmas, pushing unemployment to 10% of the workforce.

Business Secretary Alok Sharma said:

“The Government is doing everything it can to protect people’s incomes through our Coronavirus Job Retention Scheme, which is now supporting over 9 million jobs across the UK.

We urge employers to do everything they can to avoid making redundancies, but where this is unavoidable it is important that employees receive the payments they are rightly entitled to.

New laws coming into force today 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.”

The furlough scheme has protected the jobs of millions of workers, with the Government paying 80% of their salary, but it is being wound down from August and stopped altogether in October.

TUC general secretary Frances O’Grady said:

“People should get full redundancy pay, but the Government must be focused on stopping job losses in the first place.

We urgently need targeted support for hard-hit industries, and extension of the furlough scheme beyond October for those who need it.

Without this, we risk an avalanche of redundancies in the autumn and undermining the economic recovery.”

For employers planning on making redundancies, it is important to be aware of all of an employers’ statutory redundancy responsibilities to employees being made redundant. If you have any questions regarding redundancy, then please contact a member of ViewHR today.