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On 31 July 2020, The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 came into force. These Regulations ensure that all furloughed employees receive redundancy payments at 100% of their normal pay, rather than at the reduced furlough rate.

Usually, employees who are on regular fixed salaries will get redundancy payments based on their normal wages, as if they were working full hours. The “normal wages” of employees whose hours and earnings fluctuate is based on the average of their last 12 weeks’ pay. The government is seeking to address employers who are treating the furloughed rate of pay as the “normal” wages, thereby reducing employees’ redundancy payments.

The Regulations set out how a redundancy payment is to be calculated, based on the employee’s working hours and remuneration. The calculation differs depending on whether an employee has:

  • Normal working hours and remuneration does not vary with the amount of work done;
  • Normal working hours and remuneration varies with the amount of work done;
  • Normal working hours and remuneration varies according to time of work;
  • No normal working hours.

When calculating the hours worked during the relevant period for the purposes of the SRP, the hours spent on furlough are to be included. However, when calculating the hourly rate of remuneration payable for the relevant period, any reduction in the amount payable as a result of the employee being furloughed is to be disregarded. This ensures that employees should not generally be worse off as a result of having been furloughed than if they had been made redundant outwith the CJRS.

The maximum amount of a week’s pay for the purposes of an SRP remains subject to the cap outlined in Section 227 (1) of the Employment Rights Act 1996 which is £538.

The Regulations can be found here 

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