Furloughed employees to receive full redundancy payments

30 July: The government has unveiled new laws to ensure furloughed employees who are made redundant receive redundancy pay based on their normal wage rather than a reduced furlough rate.

The legislation, which comes into force from tomorrow (Friday 31 July), is designed to guarantee that those furloughed under the Coronavirus Job Retention Scheme (CJRS) receive their full entitlement if they are subsequently made redundant.

The new rules apply to basic statutory redundancy pay entitlements, and do not impact any enhanced redundancy pay arrangements specified in individual employees’ employment contracts.

The changes also affect other entitlements, including Statutory Notice Pay which must be based on normal wages rather than employees’ wages under the CJRS, and basic awards for unfair dismissal cases, which will be based on full pay rather than wages under the CJRS.

Business Secretary Alok Sharma said the new laws will ensure furloughed employees are “not short-changed” and are paid their full redundancy pay entitlement.

“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,” he continued. 

The measures form part of an overall government package designed to curtail mass redundancies following the coronavirus pandemic. Most recently, during the Summer Statement the Chancellor announced the Jobs Retention Bonus – a scheme designed to persuade UK employers to retain staff with a £1,000 bonus for each furloughed employee who remains continuously employed as of 31 January 2021.

Despite such measures, recent research has put the number of roles cut in the wake of the COVID-19 crisis between 120,000 and 150,000, while official figures from the Official for National Statistics indicate that the number of workers on UK company payrolls fell by 649,000 between March and June.