27 Apr Furlough and Statutory Payments
Since the furlough scheme was announced over a month ago, we have all come a long way. Together we’ve navigated (sometime stumbled!) around the hurdles and challenges that come with people management in these uncertain times of new rules and emergency procedures. And as the saying goes: ‘life goes on’.
Now is the time to start thinking about how furlough may or may not affect some of our future payments and processes. We’ve tried to cover what we think will be the most likely ones to overcome in the coming months.
Paid Parental Leave
We’ve all heard about the pending Corona-baby boom, but we haven’t asked what impact being furloughed will have on employees who need to take paid parental or adoption leave in the near future. Many employees may feel nervous if they have been furloughed on 80% pay for a few months and if this will affect their pay for maternity leave (SMP), paternity leave(SPP), shared parental leave (ShPP), adoption leave (SAP) or parental bereavement leave (PBP).
However, the government has recently announced that furloughed workers planning to take paid parental or adoption leave will be entitled to pay based on their usual earnings, rather than the 80% furloughed pay rate. This is to ensure that there is no future detriment to those who have been furloughed.
This will also ensure eligibility for statutory pay is fair. To be eligible for SMP, SAP, SPP, ShPP or PBP, an employee’s average weekly earnings must be at least equal to the Lower Earnings Limit set by the government. Therefore this calculation will also be based on usual earnings and not furloughed earnings, where they have not been topped-up.
Whilst there has been no official guidance on this from the government, based on the above it is very likely that any statutory payments, such as redundancy, will also be based on employee’s usual earnings rather than the 80% furloughed pay rate.
As we enter into the end of lockdown and the end of the job retention scheme, it is a reality that redundancies will have to be considered. You may even be looking at figures now in case it is a route you need to follow.
Statutory redundancy payments are based on an average weeks’ pay; it would only seem fair that this average was based on usual earnings and not pay during a period of furlough, where it was not topped-up to 100%. This again would ensure there is no future detriment to those who were designated as furloughed. Of course, the statutory cap, currently £538 per week, will still apply.
The key rule here is that those who have been on a period of furlough are to be treated fairly and reasonably, and not be treated less favourably or receive less pay comparable to employees who were not furloughed or the employee’s pre-furlough employment.
If you are an employer and have any further questions relating to furlough and statutory pay, our team of friendly HR professionals is here to help! Feel free to get in touch on 0844 682 7488.
This factsheet has been created on Monday 27th April 2020. Please note that details are subject to change. Updates will be created and issued as and when available.