New law protects furloughed workers from reduced redundancy pay

A new law to support workers has been introduced, following reports that some employers are reducing redundancy pay for their furloughed staff.

While the number of employers making cuts to redundancy pay is in the ‘minority’, the law has been quickly brought into action.

The Minister stated that they want to provide reassurance during these ‘difficult times’ and also ensure that staff aren’t short-changed.

How has redundancy pay been cut?

Many have committed to providing redundancy pay based on the employee’s full pre-furlough salary - however, not all employers have matched that, instead paying only the 80% covered by the Government.

With the prediction that the end of furlough could result in 1.2 million redundancies, this ‘loophole’ required an immediate amendment to safeguard staff at risk during these challenging times.

What will the new law change? 

For those with normal working hours, the calculations for redundancy pay or notice pay that fall on or before 31st October 2020 must disregard any reduction in the amount payable due to furlough.

Alok Sharma, Business Secretary, stated: “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 entitled to.”

It’s worth noting that the law change won’t impact upon an enhanced redundancy pay that is pre-determined in the terms and conditions of an employee’s employment contract.

How can IRIS help?

To support all our customers, we are continuously updating our payroll solutions in line with the latest furlough guidance so you can rest assured that your processes are compliant and correct.

If you’re looking for a powerful and user-friendly payroll solution to manage these changes, download your free trial of IRIS Payroll Business here or if you’d like to view all our payroll offerings, click here.

We also offer a range of brilliant HR software to help you manage the ever-changing people processes, which you can check out here.