Furloughed workers get redundancy pay protection

September 2020

The Government has closed a loophole which allowed employers to make furloughed staff redundant on reduced pay under the furlough scheme.

The new law kicked in on 31 July 2020 to ensure furloughed workers who are made redundant receive redundancy pay based on their normal wage.

Employees who are made redundant after more than two years of continuous service are usually entitled to a statutory redundancy payment.

This payout is based on their length of service, age and pay, up to a statutory maximum.

Many of the UK’s 9.6 million furloughed workers are being paid at 80% of their normal wage.

The Government had urged employers to do right by their employees and pay those being made redundant based on their normal wage.

Redundancies have been tipped to rise as the furlough scheme winds down at the end of next month, and a minority of employers made redundancies using the reduced furlough rate.

But the Government acted quickly to close the loophole to ensure those eligible and affected receive statutory pay based on their normal wages.

Alok Sharma, business secretary, said:

“Where redundancies are unavoidable, it is important that employees receive the payments they are rightly entitled to.

“These new laws ensure furloughed workers are not short-changed if they are ever made redundant – providing some reassurance for workers and their families during this challenging time.”

The new law extends to statutory notice pay, which ensures workers are given a notice period before their employment ends.

In addition, basic awards for cases of unfair dismissal must be based on full pay rather than reduced wages through the furlough scheme.

Talk to us about termination payments.

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