Furloughed employees entitled to full statutory payments based on their normal wages
In order to ensure that furloughed employees who are made redundant receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate, the Government has laid the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 SI 2020/814 before Parliament. The Regulations also apply, among other things, to the calculation of the basic award for unfair dismissal and statutory notice pay.
The Regulations, which came into force on 31 July 2020, modify the calculation of a ‘week’s pay’ for the purposes of statutory redundancy pay and other statutory payments. The new statutory provisions are complex. However, in essence, for those with normal working hours, any reduction in the amount payable as a result of the employee being furloughed must be disregarded. For those who do not have normal working hours, a week’s pay is calculated according to their ‘reference salary’ for claiming furlough pay under the Coronavirus Job Retention Scheme, but without the cap imposed by the Scheme.
The legislation also covers other statutory employment rights that depend upon calculating a ‘week’s pay’, namely:
- remuneration for time off to look for employment or arrange training (Ss.53 and 54 ERA);
- notice pay (Ss.88 and 89 ERA);
- compensation for failure to provide a written statement of reasons for dismissal (S.93 ERA);
- compensation for failure to comply with an order for reinstatement or re-engagement (S.117 ERA);
- compensation for unfair dismissal; and
- the assessment of whether an employee is to be taken to be kept on ‘short-time’ for a week in accordance with S.147(2) ERA (which applies when the employee’s remuneration for the week is less than half a week’s pay).
Link to Regulations: https://www.legislation.gov.uk/uksi/2020/814/contents/made
As with our other updates, this is only intended to be a summary and not specific legal advice. If you need any help or would like further information about how we can support your business, or advice generally about managing your workforce during these unprecedented times, please do not hesitate to contact the Employment Team.