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The Government has published new legislation on a week’s pay which comes into effect on 31 July. Its aim is to clarify the dismissal-related rights of employees who have been furloughed under the Coronavirus Job Retention Scheme, which ends on 31 October. The basic idea is to ensure that statutory redundancy payments and other statutory dismissal-related entitlements are calculated based on the employee’s normal pay, rather than any reduced furlough rate.
Achieving this in practice is quite complicated, because there are four different ways of calculating a week’s pay, depending on the exact working arrangements. This then forms the basis for calculating the amount of the relevant statutory payment, of which the two most commonly encountered are statutory redundancy payments and the basic award for unfair dismissal.
In the standard case of a salaried employee with normal working hours, this is achieved by treating their furloughed hours as normal working hours, and disregarding any reduction in the amount payable as a result of the employee being furloughed. In other cases the averaging provisions need to be adjusted to achieve the same overall effect.
The new (and temporary) rules for calculating a week’s pay apply to the following statutory entitlements of employees who are – or have been – furloughed:
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