4th August 2020

Government passes new laws to clarify calculation of statutory notice and redundancy payments for furloughed employees

Every day is a school day when it comes to the Government’s Coronavirus Job Retention Scheme (CJRS). The CJRS has evolved significantly since its inception in March. Unfortunately, redundancy has been brought into focus for many organisations as they prepare for the future. It is now settled that employees who are furloughed can be consulted with regarding redundancy, and ultimately made redundant, during their furlough period. This is of course subject to the usual obligations for the employer to conduct a meaningful consultation process, and if necessary, collective consultation for larger scale redundancies.

It has also been clarified that while statutory redundancy payments cannot be claimed back through the CJRS, notice payments can be claimed (provided that the employee remains employed throughout their notice period). The CJRS cannot be used to claim for payments made in lieu of notice (where the employee gets cash up front for their whole notice period with an immediate end to their employment).

One issue that has been subject to much discussion, is the question of calculating notice payments and redundancy payments for furloughed employees.   Do they get these at 80% or 100% pay?

At the tail end of last week, the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 came into force. These new regulations implement some protection for employees in respect of certain payments. In particular: –

  • For those employees with normal working hours (such as me), where the calculation date for statutory redundancy pay lands on or before the end of the CJRS (31 October 2020), their statutory redundancy pay is to be calculated disregarding any reduction in the amount payable as a result of the employee (“E”) being furloughed. Statutory redundancy pay is calculated using age, number of completed years’ service and gross weekly pay (capped at £538).
  • For those employees whose pay varies with the amount of time they work, or those who don’t have normal working hours, their payments are usually calculated over the last 12 weeks. In such cases, where the 12-week period includes at least 1 week when the employee was furloughed, the remuneration for that part of the relevant period is the hourly rate payable under E’s contract of employment in force on the calculation date, disregarding any reduction in the amount payable as a result of E being furloughed.
  • These calculation methods apply to statutory redundancy pay and also notice pay, where the notice period in place reflects statutory notice (1 week per year of service, up to a maximum of 12).
  • Where the employee has a contractual notice period which is at least 1 week (or more) greater than their statutory notice period, these protections will not apply to the notice payment (for the avoidance of doubt they will still protect redundancy pay). For example, I have been employed for ten years, and my statutory notice period would thus be 10 weeks. My contractual notice period is actually 3 months (being more than 1 week greater than 10 weeks). In my case, I would not benefit from this protection and my employer could opt to base my notice pay on the furlough rate of pay.
  • These protections came into force on 31 July 2020 and do not operate retrospectively, so those who have already been paid redundancy payments will not be able to rely on these Regulations.

These changes will also apply to other payments, such as basic awards in claims for unfair dismissal.

If you have any questions about your rights or obligations in respect of these matters, please contact a member of the Blackadders employment team.

Jack Boyle, Director
Accredited by the Law Society of Scotland as a Specialist in Employment Law
Blackadders LLP


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