Emergency legislation clarifies redundancy rights for furloughed employees

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:

  • Statutory redundancy payments
  • Basic awards for unfair dismissal
  • Payments guaranteed during the employee’s statutory notice period (these provisions don’t apply if the contractual notice period is at least a week longer than length of the minimum statutory notice)
  • Compensation for breach of the requirement to give a written statement of reasons for dismissal
  • Additional awards for failure to comply with an order for re-engagement or reinstatement
  • Pay for periods during which employees under notice of redundancy take time off to look for work
  • Calculating the trigger for engaging employees’ statutory rights in relation to short-time working

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