New law on calculation of various statutory payments for furloughed employees

The Government has announced today that the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 will come into force tomorrow (31 July 2020). The aim of the new Regulations is to ensure that furloughed employees will not be short changed if they are dismissed.

The Regulations specify how to calculate a week’s pay for furloughed employees for the purpose of various statutory payments including notice pay, redundancy pay and compensation for unfair dismissal. Broadly speaking, they provide that, for the purpose of calculating a week’s pay, the sums should be based on an employee’s normal wages and not their reduced furlough rate.

The Regulations also apply to certain other statutory entitlements connected to the termination of employment including the calculation of any statutory remuneration for time off to look for employment or arrange training, any statutory sum resulting from a failure to provide a written statement of reasons for dismissal and any statutory sum resulting from a failure to comply with an order for reinstatement or re-engagement.

They also set out how a week’s pay is to be calculated for the purpose of deciding whether an employee is taken to be on short-time for statutory purposes.

The Regulations are complex and require careful consideration. If you have any questions about how they may impact you, please do not hesitate to contact us.

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