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Is a furloughed employee entitled to a statutory redundancy payment?

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The last few months have certainly seen many changes in the world of Employment Law, particularly with the introduction of furlough leave.  Many questions arose following its implementation regarding timeframes, holiday leave, maternity and paternity leave and notice pay; as we now start the see the end of the scheme however, and more redundancies occurring, there is the question of whether an employee who has been on furlough leave for four weeks or more is entitled to a statutory redundancy payment, as furlough leave has been seen as an alternative to redundancy. 

Our Employment Law team discuss this today in our latest article, offering advice to employers as to what employees are entitled to and when, as well as what considerations should be made when making an employee redundant.

When is an employee entitled to statutory redundancy payments?

In addition to an employee being made redundant, there are limited circumstances where an employee may claim a statutory redundancy payment without actually being made redundant.

Employees may apply for statutory redundancy pay if they have been employed continuously for two years and have been temporarily laid off or placed on short-time working for more than 4 weeks in a row or more than 6 non-consecutive weeks in a 13 week period.  Employees are classed as laid-off if:

  • they are off work for at least one day
  • their hours have been reduced and they are therefore on short-time working.

Is furlough leave the same as redundancy?

If an employee has been on furlough leave for four or more weeks then they would not be eligible to apply for statutory redundancy payments.  This is because being placed on furlough leave is not the same as being temporarily laid off or placed on short-time working.

Furlough leave is a new concept that was introduced by the Government in March 2020 as part of the Coronavirus Job Retention Scheme (CJRS). Under this scheme, the Government pays a percentage of furloughed employees’ wages and the employer keeps the employee on the payroll and avoids lay-offs.  

A key difference is in the amount of pay the employee is receiving.  To be eligible to claim statutory redundancy payments, the employee must have been earning less than a half week’s pay.  While on furlough leave, employees are entitled to earn 80% of their contractual pay up to a cap of £2,500 per month.

Employees may be entitled to a statutory redundancy payment if they were furloughed and then made redundant, and you may unfortunately be considering redundancies as an option when the furlough leave scheme comes to an end in October.  If you have made employees redundant during or after furlough leave, the employee can claim redundancy pay if they have been employed by you for at least two years.

You should bear in mind that time spent on furlough leave counts towards continuous employment, for example, an employee who was employed for 1 year and 10 months and then placed on furlough leave for two months would have reached the two year threshold and be entitled to redundancy pay.  Employees may also be able to claim for:

  • accrued holiday pay,
  • outstanding wages, and
  • notice pay.  

If your business has become insolvent, employees may be able to apply to the Insolvency Service for these payments.

How do I make a furloughed employee redundant?

You should keep a few things in mind if you do find that you have to make redundancies after having already furloughed employees:

  • Employees are entitled to a fair selection process - if employees are made redundant because they were on furlough, this could be considered discrimination and may give rise to a tribunal claim.
  • Calculation of payments for those being made redundant while on furlough - whether their notice pay should be based on their full contractual pay or the 80% they would have received while on furlough may depend on whether their notice period is contractual or statutory.
  • Redundancy pay and outstanding holiday pay should be paid at their full salary rate, not the 80% furlough rate.

Furlough leave is still a relatively new concept in UK employment law and the rules surrounding it are still being developed. How furlough leave fits into the existing legal framework will be made clearer as more Government guidance is published and we will bring more updates as they are published. 

If you have questions about furlough leave, the CJRS or how to follow a fair process when making redundancies in your business, you can contact the Employment Law team on 023 8071 7717 or email employment@warnergoodman.co.uk to discuss your own situation.  Alternatively, you may find the following articles of use:

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.