Redundancy Pay For Furloughed Workers Must Be Based On Their Normal Wages And Not The Furlough Rate

All of the market indicators suggest that the Government Job Retention Scheme has been successful in protecting the jobs of employees during the lockdown period, however, the gradual scaling down of the Scheme will inevitably leading to a significant level of redundancy dismissals.

Many employers are using the Scheme to pay towards employee notice pay in redundancy dismissals and this practice has been approved by the Government.

One point which has today been clarified by Government regulations is that furloughed workers who are made redundant while on furlough will be eligible for redundancy pay based on 10% of their normal salary (their pre- furlough salary) and not the reduced furlough rate. The new regulations come into effect on Friday.

The purpose of the regulations is to address the problem of some employers who had sought to pay employees at the lower rate. The regulations are complex but the short message for employers going forward is that statutory notice pay and redundancy payments must be calculated at the full rate.

Please contact Stuart Robertson (Partner – Head of Employment Law) or Graham Millar (Partner) if you have any questions.

The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.