Posted by James Medhurst, Senior Associate
Statutory redundancy pay and notice pay increased for employees on furlough
James Medhurst explains what you need to know about today’s (31 July) change to statutory redundancy and notice pay.
The government has today introduced legislation which requires both statutory redundancy and notice pay for employees who have been furloughed to be based on their normal pay before the furlough period began. For employees with no fixed hours, who have received less than usual while on furlough, payments should be based on what they would usually earn, rather than the 80% of it they may have been receiving on the CJRS.
For employees with fixed hours, payments should be based on their contractual entitlement, disregarding any reductions made as a result of them being furloughed. This appears to mean that, if an employee has agreed to receive reduced pay while on furlough, such agreement is disregarded. However a permanent or temporary reduction in pay will not be disregarded when it is unrelated to furlough. As ever with furlough-related issues though, a degree of legal uncertainty remains.
The change to statutory redundancy payments will only really affect lower paid employees, because the weekly cap of £538 will continue to apply, and there will be no effect on enhanced redundancy payments, where calculations will continue to be based upon what was agreed in the contract.
The change to pay during notice periods may mean that some or all of your employees are entitled to their normal pay (rather than their reduced furlough pay) during their statutory notice period. However, these new regulations do not necessarily mean that all staff are entitled to full pay during their notice periods as a matter of course. Guidance from the government on the intention of the new regulations in this regard, would be welcome.
The changes also apply to other statutory payments, including the basic award for unfair dismissal and compensation for failure to provide a statement of terms, but do not apply to holiday pay.
The furlough scheme continues to produce difficult legal questions for employers and their HR teams, and we don’t anticipate redundancy and notice pay will be the last area of contention. We will be sure to update readers further should any new changes or clarifications be announced.
If you have any questions for our Employment team about statutory pay and furloughed employees, please contact us today.
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