New legislation came into effect on 31 July 2020. The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020, SI 2020/814 addresses the amount of pay a furloughed employee should receive if made redundant having been furloughed. A furloughed employee’s ‘week’s pay’ may fall short of the statutory cap of £538 per week (section 227 Employment Rights Act 1996), whereas full pay may take them to this threshold. The legislation is designed to ensure that furloughed employees receive statutory payments that are calculated on their normal wages, rather than at a reduced furlough rate.
The Regulations address not only the effect of furlough on a statutory redundancy payment, but also ensure that statutory notice pay is calculated at the normal rate of pay rather than any reduced furlough rate, and also ensure that the statutory maximum compensatory award in a successful unfair dismissal claim is based on the full, normal rate of pay. It should be noted that an employee is only entitled to a statutory redundancy payment once they have two years’ continuous service with their employer.
There are two areas of difficulty as the Regulations apply to furloughed employees. Employees placed on short time working may not afforded protection in terms of calculating pay. Secondly, the Regulations only apply to statutory payments, so do not cover contractual notice pay or the calculation of enhanced redundancy schemes.
At the commencement of the Coronavirus Job Retention Scheme, it was apparent that there were areas that could be exploited (most notably ‘volunteer’ work, and the use of the scheme towards notice pay) and these Regulations go some way to addressing some of the loopholes. We said at the start of the CJRS, and it remains the case that there is potential litigation going forward on a number of unresolved points as a result of well intentioned, yet poorly drafted (in places) legislation. The difficulty for employees is that the only way the legislation will be tested is through the courts. Pre-COVID19 some employment tribunal claims were taking 18 months to 2 years to get to final hearing. We would not be surprised if this delay increases to at least 3 years.
In the event that any of our members are facing redundancy, we will give consideration as to whether these Regulations impact on payments on a case by case basis. We would therefore urge members to ensure that we are updated on an individual basis.