What was the furlough redundancy pay loophole?
The rules around statutory (i.e. the legal minimum) redundancy pay are a little complex, and fully explained in our redundancy guide.
In simple terms, the amount you have to pay fired employees is always based on a percentage of their weekly pay.
You only have to make a statutory redundancy payment when an employee has worked for your business for at least two years.
The amount you need to pay depends on the age of the employee being made redundant, and how long they have worked for you.
This weekly pay is based on how much an employee was paid per week on average in the 12 weeks prior to the day they were given their redundancy notice.
However, under the furlough scheme, only 80% of an employee’s normal salary is covered by the government (with employers able to top up the rest if they wish).
This has meant that many employees have only been receiving 80% of their normal pay while on furlough.
Previously then, employees who were furloughed and then fired could receive lower redundancy pay, because they received a lower weekly wage whilst on furlough.
This would obviously further disadvantage those employees at a time of great personal stress.
While the government stressed that most employers have done right by their fired employees and based redundancy pay on their normal (pre-furlough) weekly pay, some have not.
This has led the government to make sure that the law makes clear that redundancy pay must be based on an employee’s normal weekly pay.
via https://www.AiUpNow.com/ by Alec Hawley, Khareem Sudlow
