Government confirms that redundancy pay and notice pay for furloughed workers is to be based on full pay
The Government has ensured that furloughed employees will receive statutory redundancy pay and statutory notice pay based on their normal wages – rather than at a reduced furlough rate – under a new law being brought in today (Thursday 30 July).
The legislation, which will come into effect from 31 July 2020, will ensure all furloughed workers being made redundant receive their full entitlement. Employees that have provided at least 2 years’ of continuous service are usually entitled to statutory redundancy pay, which is calculated based on length of service, age, and pay, up to a statutory maximum.
The new regulations will also apply to statutory notice pay, which is where employees must be given a notice period before their employment ends. During this period, the changes ensure that employees must be paid at the full rate of their normal wage.
This notice period varies depending on how long the employee has worked for the employer. The statutory notice periods are:
- at least one week’s notice if employed between one month and 2 years
- one week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more
Lee Muter, Employment Taxes Partner at UNW, said: “This is a welcome change to the legislation, as there was some doubt whether employers had to use the furloughed pay to calculate both statutory redundancy pay, as well as employee’s normal notice pay, or use the furloughed rate of pay, which often could be 80% of the full pay.
“This seems very equitable, as many employees may have agreed to reduce their salaries initially on furlough to help the business out, only to receive a further blow to their income if their employer was then forced to cut their workforce, and they then received less than they would have been entitled to.
“It is worth noting also that the government has previously confirmed that notice pay can be covered by the furlough grant, although the amounts they can claim from August onwards is being gradually reduced towards the end of the scheme in October.”
If you have any questions or have any concerns about how this announcement might affect you, please contact Lee Muter, Employment Taxes Partner, on 0191 243 6000 or at email@example.com
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