Companies must pay full redundancy payments to furloughed staff

Furloughed staff whose employment is terminated must receive redundancy payments calculated at 100% of their normal, pre-furlough pay, Thursfields Solicitors has warned.

The comments following new legislation that came into effect on 31 July that makes it unlawful to base statutory redundancy or notice payments at any reduced furlough rate.

Helena Morrissey, head of employment at Thursfields Solicitors, said: “The government was concerned at reports that some employers had been paying redundancy based on less generous furlough pay, which was 80% of normal pay up to a maximum of £2,500 per month.

“This new law has been introduced to address this issue and to make sure that no-one receives lower redundancy entitlements than they would otherwise have been entitled to simply because they have been furloughed.

“Therefore, anyone who has been made redundant since 31 July is entitled to receive statutory redundancy payments which are calculated on the basis of their normal pay.

“They would have a potential claim against their employer if their termination payments are based on their furlough rate.”

Helena explained that the new law does not affect the entitlements of employees who have not been furloughed as it applies only to furloughed and flexibly furloughed staff, including those who have recently returned from furlough.

She also highlighted that as the new law only came into effect on 31 July 2020 it did not cover redundancy payments already made before that date.

She added: “It is crucial that employers are aware of this new law or else they could face damaging legal action for underpaying employees who are being made redundant.”

Any businesses wanting advice on redundancy payments can contact us on 0121 726 8781.