Calculating Redundancy Pay for Furloughed Workers

By August 6, 2020January 28th, 2021Employment

On 30 Jul 2020 it was announced that the government would pass legislation to ensure that where a furloughed employee is made redundant, their statutory redundancy pay and statutory notice pay (along with other payments) will be calculated on the basis of their normal salary and not their reduced furlough pay under the Coronavirus Job Retention Scheme (CJRS).

The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 SI 2020/814 came into force on 31 July 2020 and modifies the calculation of a ‘week’s pay’ as set out in the the Employment Rights Act 1996. The new Regulations will ensure that various statutory entitlements based on a week’s pay and connected with termination of employment are not reduced as a result of an employee being furloughed, including:

  • Statutory redundancy pay
  • Notice pay
  • Compensation for unfair dismissal
  • Failure to provide a written statement of reasons for dismissal
  • Failure to comply with an order for reinstatement or re-engagement
  • Remuneration for time off to look for employment or arrange training
  • The assessment of whether an employee is to be taken to be kept on ‘short-time’ for a wee

The new provisions are complex depending on whether the employee has ‘normal working hours’ and, if so, whether remuneration varies with the amount or timing of work done. However, in summary for employees with normal working hours, any reduction in the amount payable as a result of being furloughed must be ignored. For those who do not have normal working hours, a week’s pay is calculated according to their ‘reference salary’ for claiming furlough pay under the CJRS, but without the cap imposed by the scheme.

Sarah Scholfield

Author Sarah Scholfield

Sarah is a Solicitor in our Employment Team. Sarah has extensive experience advising employers on a wide range of employment matters including unfair dismissal, discrimination and whistle blowing claims, drafting contracts of employment and dealing with disciplinary/grievance matters. She also regularly advises employees on settlement agreements, disciplinary/grievance matters and unfair dismissal. She is a member of the Employment Lawyers Association. Sarah has been described as “extremely knowledgeable… diligent, sharp” whilst retaining “that all important client focus”.

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