New law to ensure furloughed employees receive statutory redundancy payments based on 100% of their normal pay

On 30th July 2020 the government announced it will be implementing new legislation to ensure that all furloughed employees receive statutory redundancy payments at 100% of their normal pay rather than at a reduced furlough rate.

In terms of background, an employee will be entitled to statutory redundancy pay if they have been working for their employer for 2 years or more. The new legislation will ensure that pay received in relation to statutory redundancy pay is calculated based on an employee’s normal pay, rather than furlough pay (potentially 80% of their normal wage).

The statutory redundancy formula for calculating such payments is based on average weekly pay, alongside other factors such as length of continuous service and the employee’s age. Average weekly pay is usually worked out by averaging the pay over the 12 week period before the date an employee is made redundant. This legislation ensures that employers must treat any weeks an employee spent on furlough over the 12 week reference period as if they were working and on full (100%) pay.

For employers planning on making redundancies, it is important to be aware of this new legislation to ensure that the statutory redundancy element of any redundancy payments are correctly calculated.

At the time of writing the legislation has not been published in full and this alert is based on the information in the government announcement. For more information please contact the authors below or your usual Stephenson Harwood contact.