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Furloughed workers will receive redundancy sums based on normal pay in new legislation

Written by Latifa Yedroudj on Thursday, 30 July 2020. Posted in Politics, Analysis

From Friday onwards, furloughed workers losing their jobs will be eligible to receive pay based on their normal wages

Furloughed workers will receive redundancy sums based on normal pay in new legislation

From Friday onwards, furloughed workers losing their jobs will be eligible to receive pay based on their normal wages

The coronavirus pandemic has forced many companies to furlough their employees – and some employees have even been axed from their jobs. Now, the government has passed new legislation to ensure furloughed workers will be guaranteed redundancy packages based on their normal wages to prevent businesses from offering reduced pay outs.

Under the new law, furloughed workers under the Coronavirus Job Retention scheme will be eligible for redundancy pay based on their normal wages, rather than the lower 80% rate offered. This intervention comes after some firms have taken advantage of the crisis to pay workers at a lower rate. The government said that while most companies were offering workers normal redundancy packages, a minority were attempting to offer their staff a less generous payout based on the 80% furlough wage. Employees with more than two years’ continuous service who are made redundant are usually entitled to a statutory redundancy payment that is based on length of service, age and pays, up to a statutory maximum. Now, many as UK’s 9.5 million furloughed workers are being paid 80% of their normal wage. The legislation will come into force on July 31, ensuring that furloughed employees receive their full redundancy pay entitlement.

“The government is doing everything it can to protect people’s livelihoods, and we are supporting more than nine million jobs through the Coronavirus Job Retention Scheme,” Business Secretary Alok Sharma said. “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 will ensure furloughed employees are not short-changed and are paid their full redundancy pay entitlement – providing some reassurance in an undeniably testing time.”

The new law will also apply to statutory notice pay, where employees must be given a notice period before their employment ends, varying from at least one week notice up to 12 weeks depending on how long they have worked for their employer. During this notice period, employees must be paid. The legislation will ensure that notice pay is based on normal wages rather than the lower wages workers may have been paid under the Coronavirus Job Retention Scheme. Other changes coming into force will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.

Frances O’Grady, general secretary of the Trades Union Congress, said it was right for workers to get full redundancy pay, but warned ministers to be more focused on stopping job losses in the first place. “Prevention is better than the cure,” she said. “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.”

An estimated 150,000 people have been made redundant during the coronavirus crisis – and experts expect this figure to increase even more, especially after the furlough scheme ends in October. Earlier this week, the National Institute of Economic and Social Research think tank warned that the furlough scheme could lead to 1.2 million Britons being unemployed by Christmas. This will leave 10% of Britain's’ workforce unemployed.

From August, the government will begin tapering support on the furlough scheme and ask employees to contribute in order to continue receiving state support for furloughing their staff. The furlough scheme will be closed entirely by the end of October.

About the Author

Latifa Yedroudj

Latifa Yedroudj

Latifa Yedroudj has joined the Elite team to fully immerse herself in the business side of journalism, a strong passion of hers cultivated from young having co-run her mother's start up business since she was 18. Her interests lie in a wide range of subjects, including start ups, business, travel, and anything entrepreneurial she can get her hands on. She has worked for some of the biggest names in journalism including The Guardian and The Mirror. Follow her on @latifayed on Twitter for her latest journo rants.

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