The end of furlough (CJRS) is here – Next stepsClient Support
Can you believe that after 19 months of supporting the wages of up to 11.6 million workers, the 30 September 2021 marks the end of the furlough scheme.
I can imagine payroll processors up and down the country have been counting down to this day, but what comes with this is nearly one million workers who have not yet returned to work. The uncertainty of ‘what next’ will be on many peoples’ minds, and employers who are still utilising the scheme will have a number of decisions to make.
Is redundancy the answer?
It is going to be very difficult for employers who might not be able to afford a return for some or all of their staff currently still furloughed, so management may want to review and restructure their workforce.
Redundancy and furlough pay
Both employee’s redundancy rights, and other employment rights will not be affected by being on furlough. Employees who are made redundant will be entitled to a statutory redundancy payment if they have two years continuous employment (inclusive of the time they were on furlough), as well as any contractual redundancy entitlement.
Statutory redundancy payments must be calculated based on an employee’s pre-furlough salary. If employees pay varies, or they have no normal working hours, then pay is normally averaged over the previous 12 weeks. If this period includes at least one week of furlough then the averaging must be based on full rather than reduced pay.
Statutory redundancy payments are based on a multiplier of:
- half a week's pay for each year of employment up to the age of 22;
- one week's pay for each year between the ages of 22 and 40;
- one-and-a-half week's pay for each year over the age of 41.
There is a maximum of 20 years' service which can be taken into account and a statutory maximum limit on the week's pay (£544 per week from 6 April 2021). For those made redundant on or after 6 April 2021, the maximum statutory redundancy pay is £16,320.
Right to consultation
Employers should always consult with employees before making them redundant. The consultation will normally involve:
- The employer confirming why the employee has been selected
- Looking at any alternatives to redundancy such as reduced hours
If this doesn’t happen, the redundancy could be unfair dismissal.
Employees who are made redundant whilst on furlough are entitled to notice of termination in accordance with their contract. The statutory notice pay during the notice period is payable at the employees full contractual normal salary.
It is vital to remember that holiday pay has still been accruing whilst staff have been on furlough, and therefore days that an employee has accrued need to be included as part of the employees’ final pay. Holidays taken during a furlough period must have been paid at the employee’s full salary, meaning that the employer must have topped up the furlough pay. Days off where the employee received just furlough pay (not the top up to a normal day’s salary) do not count against annual leave taken.
There is a lot to consider when making an employee redundant, and if you need any support with calculating redundancy pay, or determining the tax and NIC treatment please get in touch.