The government brought into force new regulations with effect from 31 July 2020, primarily intended to protect furloughed employees who are made redundant (the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020). However, the effect goes wider than just statutory redundancy payments. The Regulations will mainly affect employees whose actual week’s pay is less than the statutory cap of £538 (which still applies under the Regulations).
Statutory redundancy payments
The main aim of the new legislation is to ensure that furloughed employees who are made redundant receive statutory redundancy payments calculated by reference to pre-furlough pay, rather than the reduced rate that applies during furlough.
This is achieved by altering the calculation of a week’s pay for employees whose employment ends on or before 31 October 2020:
- for employees with normal working hours and fixed remuneration, a week’s pay is calculated disregarding any reduction as a result of furlough;
- for employees with normal working hours but variable remuneration, a week’s pay is calculated as an average over a 12 week reference period. Where an employee was receiving reduced furlough pay during any part of that 12 week period, the reduced earnings are disregarded and substituted with what the employee would have earned if not furloughed.
Effect on other rights and payments
The Regulations also apply the unreduced calculation of a week’s pay to the following:
- pay due to a furloughed employee during their statutory notice period;
- pay to which an employee is entitled when exercising their right to take time off to look for work or receive training after notice of redundancy has been given; and
- compensation awarded by an Employment Tribunal for:
- unfair dismissal;
- failure to reinstate or re-engage after a finding of unfair dismissal; and
- failure to provide written reasons for dismissal.