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New Laws Protect Furloughed Employees from Reduced Redundancy Payments

Written by: Keith Tully

Stacks of pound coinsNew laws being introduced this week mean anyone who loses their job having been furloughed by their employers is entitled to claim full redundancy payments.

The rules should ensure that people being laid off are given statutory redundancy pay in line with what they were earning prior to being furloughed rather that what their salary has been reduced to more recently.

Many employers will have little choice but to reduce the scale of their workforces in the coming weeks as the government’s Coronavirus Job Retention Scheme is scaled back and eventually closed entirely between August and the end of October.

The government says that while most businesses could be trusted to “do right by their employees” and provide redundancy packages based on normal pay levels, some may have been intending to leave some members of their staff short changed.

Legislation detailing the new rules on the issue come into force from July 31st but will only apply to employees with more than two years of continuous service behind them.

Nonetheless, the government has said it expects the new laws to provide some reassurance to a significant number of people who might have been worried about what kind of payments they’d be entitled to if they do lose their job in the coming weeks.

“We urge employers to do everything they can to avoid making redundancies, but where this is unavoidable it is important that employees receive the payments they are rightly entitled to,” said Alok Sharma, business secretary.

“New laws coming into force today will ensure furloughed workers are not short-changed if they are ever made redundant – providing some reassurance for workers and their families during this challenging time.”

Around 9.5 million jobs are understood to have been supported by the Coronavirus Job Retention Scheme since March and some organisations have been calling for the initiative to remain in place beyond the end of October.

Indeed, the thinktank NIESR (the National Institute of Economic and Social Research) has said that winding down the furlough scheme would be a “mistake” that could cost the UK more than 1.2 million jobs by Christmas.

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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