Redundancy pay protection for furloughed employees

Many furloughed employees will have had their wages cut to 80%, being the amount employers could reclaim via the Coronavirus Job Retention Scheme.

New Regulations came into force on 31 July 2020 to ensure that statutory redundancy payments for furloughed employees are calculated on the basis of their 'normal' rate of pay, rather than the reduced furlough rate. The Regulations apply to all employees who have been furloughed or flexibly furloughed.

The Regulations also amend the way in which some other statutory payments, (including, in some cases, statutory notice pay) are calculated to provide protection for furloughed employees.

Furloughed employees: how do we calculate their statutory redundancy pay?

Statutory redundancy payments are calculated on the basis of employees' length of service, age and a 'week's pay'. For an employee to be eligible for a statutory redundancy payment, they must have at least 2 years' continuous service.

How you calculate a 'week's pay' depends on whether an employee has normal working hours (and Brodies Workbox subscribers can see more detail on this at Redundancy: Payments). From 31 July 2020, for employees who have been furloughed, this calculation must be based on their 'normal' (i.e. non-furloughed) rate of pay.

A 'week's pay' will still be subject to the statutory cap (currently £538 per week) when calculating statutory redundancy payments.

Employees may also be entitled to an additional contractual redundancy payment – how this is calculated will depend on the terms of the contract.

Notice pay for furloughed employees, and other statutory payments

The Regulations impact on the calculation of some other statutory payments, including statutory pay for time off to look for employment or arrange training, for those who have been given notice of redundancy.

In some cases, the Regulations will also impact on the calculation of notice pay for furloughed employees. However, the position on this is not straightforward: not all notice pay will need to be calculated on the basis of 'pre-furlough' pay. We set out the details in our Brodies Workbox FAQ: If notice is served during furlough, how do we calculate notice pay? This FAQ, along with our other Workbox: Coronavirus content, is free to view for all, regardless of whether you are a Workbox subscriber.