Change in law regarding statutory redundancy pay and notice pay
The Government will introduce law to ensure that furloughed employees receive statutory redundancy pay calculated on their normal wages, rather than at a reduced furlough rate.
New legislation
The Department for Business, Energy & Industrial Strategy (DBEIS) has today announced new legislation that will come into effect tomorrow, 31st July, to ensure that:
- Employees are receiving statutory redundancy pay at their full rate of pay, and not at a reduced rate based on furlough pay; and
- Statutory notice pay must also be calculated based on normal wages, rather than their wages under the furlough scheme.
Most employers who have faced redundancy situations have been paying staff redundancy pay based on their normal rates of pay, rather than the reduced furlough rate, but a minority of employers haven’t been.
Calculating statutory redundancy
Calculating statutory redundancy pay for employees relies on a calculation involving average weekly pay, length of continuous service and the employee’s age. Average weekly pay is usually worked out by adding the pay received over the 12 weeks up to when the employer notifies the employee, they are being made redundant, and dividing by 12 to get the average. This legislation ensures that employers must treat any weeks an employer spent on furlough over the 12-week reference period as if they were working on full (100%) pay.
Please note that this legislation will not impact enhanced redundancy pay that may be offered by some employers.
The legislation has not yet been released but the announcement can be found here.
