The government has announced a new law, effective from 31 July 2020 introducing changes regarding payments on termination of employment to employees who are, or have been, furloughed.
There has been no public consultation on these changes.
The main changes are:
- Where furloughed employees are made redundant and have been working for their employer for 2 years or more, their statutory redundancy entitlement will be based on their pay before they were furloughed rather than the pay they received under the Coronavirus Job Retention Scheme (CJRS).
- Basic unfair dismissal awards will be calculated in the same way: based on pre-furlough normal pay rather than pay under the CJRS.
- Entitlement to Statutory notice pay will also be based on pre-furlough wages rather than wages under the CJRS. This entitlement applies to employees whose contractual notice period is less than one week longer than the statutory minimum.
The new law does not extend this protection to employees whose contractual notice period is at least a week longer than the statutory minimum. For example, an employee on furlough with 5 years’ service and a three-month notice period falls outside these protections so the employee would be entitled to CJRS pay only during their notice period.
Employees with regular hours and pay who have been on furlough were already entitled to statutory redundancy pay (and statutory notice pay, if applicable) based on their pre-furlough pay.
However, these changes will increase entitlements for employees who do not have normal working hours because the weeks on furlough will be counted as if they were weeks where the employee was earning full pay.