From Furlough to Redundancy – what are the rules?

Submitted by Dawn on 20th August 2020

Furlough, downsize, redundancy, business, HR, government support

As an employer, is yours one of the many firms that have been forced to furlough staff during the coronavirus pandemic? If so, you need to be aware that, from now on, it’s ‘all change’.

From September 1st, there will be a pulling back of the levels of support offered by the government for employees who have been furloughed. Simultaneously, the contributions expected of you, the employer, will increase. Sadly and inevitably, as this support reduces, some businesses who are suffering negative effects of the coronavirus pandemic will be forced to issue staff redundancy notices. In this article, we look at how, if at all, the redundancy terms you offer your employees might be affected by furloughing arrangements.

What’s the immediate future for furlough?
Since government support was introduced at the start of the crisis, employers have been able to reclaim 80% of the monthly wages for furloughed employees – up to a maximum of £2,500 per month. As an employer, you have had the choice as to whether you top up the remaining 20%. 

However, since the start of August, it’s been ‘all change’. Step-by-step, the government is phasing out its support, as follows – 
Since August 1st, you have been obliged to re-start your monthly employer National Insurance contributions and pension contributions.

Increased contributions from employers
Then, from September 1st, the government’s contribution towards furloughed staff will drop from 80% to 70%.  You will be required to start contributing 10% of furloughed employees’ wages. This will change again in October when the government’s contribution will fall to 60%. You will then be expected to contribute 20%.

Throughout the period August, September and October, employees will still be entitled to 80% of their monthly wage. The difference will be that a greater contribution will be required by you, their employer. This, inevitably, will put pressure on your resources.

As you are forced to fund more of your employees’ wages, you may well feel under increasing pressure to introduce redundancies – a regrettable but necessary measure.

As an employer, what are your redundancy obligations?

Having contributed little or nothing to their wages since the government measures were first introduced, how much of your employees’ redundancy entitlement will you be expected to fund?

The answer is simple. All of it. Some employers are labouring under the misapprehension that they only have to pay redundancy based on their employees’ furloughed pay.

Under the new legislation, any employees that you make redundant while on furlough will be entitled to receive redundancy pay according to their normal wage and not their furloughed rate.

Employees must ‘receive the payments they are entitled to.’
Here’s a quote from Business Secretary Alok Sharma -

“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 rightly entitled to,” said Sharma. “New laws coming into force today [July 30th] will ensure furloughed workers are not short-changed if they are ever made redundant – providing some reassurance for workers and their families during this challenging time.”

Transparency is everything
The government has certainly made the law clear. However, what is less transparent is how the government plans to enforce the redundancy rules. Is it going to back up its words with the resources to police this? Maybe it will run an advertising campaign to educate employers. After all, with the short-term proving so uncertain for employers and employees alike, the one thing that the government can and should provide is 100% clarity.

If you’re in any doubt about furloughing and redundancy, why not call us?  We’ll be delighted to advise on every aspect.

Remember - we’re here to help.

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