Employment law
Employee rights during furlough Whilst on a period of furlough, all employees continue to retain their same work rights that include protection against unfair dismissal and the right to a redundancy payment. Furlough claims made under the CJRS can be paid during the notice period, but redundancy pay cannot be funded by CJRS claims. n Categories of worker not entitled to statutory redundancy pay Those in the following types of work do not qualify for redundancy pay: ● armed forces ● crown servants ● domestic service, where these are a member of the employer’s immediate family ● police ● share fishing ● apprentices who are not employees at the end of their training.
employees, the minimum consultation period prior to dismissal is 30 days, increasing to 45 days where the number exceeds 100. During the consultation process, or when considering anyone for redundancy, the employer must provide the employee(s) involved, as well as their representative (if they have requested one), with the following in writing: ● reasons for the redundancies ● the numbers and categories of employees involved in the process ● the numbers of employees in each category ● the plan for selecting employees for redundancy ● how the employer will carry out the redundancies ● how the employer will calculate redundancy payments. If intending to make more than twenty employees redundant, the employer must follow the collective consultation rules within a 90-day period. For fewer than twenty employees there are no set rules, but it is good practice to fully consult any employee who may potentially be made redundant. Failing to do so, could make the process unfair and lead to an employee making a claim to employment tribunals. ...payable to all employees after completion of two years’ service... How much notice? Once a redundancy consultation has finished, employers must give those employees who are being made redundant notice and agree on a leaving date. Notice periods will depend on the length of an employee’s service, and contracts may offer differing notice periods; however, the employees must be given the minimum statutory notice. This notice period does not necessarily have to be ‘worked’ but can be given via a payment in lieu of notice (PILON). For employees with between one month’s service and two years’ service, the minimum notice to be given is at least a week. From two years’ service onwards, an employee will need to be
given a weeks’ notice for every year that they are employed, capped at a maximum of twelve weeks. If there is PILON clause in the employee’s employment contract, their employment can be ended without the notice period, allowing for a payment to be made covering the notice period they would have worked. Redundancy pay Redundancy pay is payable to all employees after completion of two years’ service (but see below for excluded categories). The number of weeks of redundancy pay due is based on the employee’s age during their period of employment, with length of service capped at twenty years. The payment due is a product of multiplying the employee’s service and a week’s pay (see below for information about a ‘week’s pay’.) For employees under the age of 22, the entitlement is half a week’s pay, and for those between the ages of 22–41, the entitlement is one week’s pay. Where an employee is over the age of 41, the entitlement payable is one and a half week’s pay for each full year completed over this age. For tax year 2020/21, the statutory redundancy pay in Great Britain (i.e. England, Scotland and Wales), is £538 per week, with a maximum of £16,140. Northern Ireland has a statutory weekly cap of £560 and a maximum cap of £16,800. Class 1A NICs Statutory payments are required when making an employee redundant, but many employers offer more generous packages. Redundancy payments that are more than the above, and which are being made as a genuine compensation due to loss of office and are below the limit of £30,000, are not subject to PAYE (pay as you earn) income tax or class 1 National Insurance contributions (NICs). In the event the redundancy payment exceeds this amount, the excess is subject both to PAYE income tax with the employer liable to pay class 1A NICs at 13.8%. Since April 2020, class 1A NICs are processed in real time and paid alongside usual payroll remittances where they become due for termination payments (and sporting testimonial payments).
A week’s pay If a week’s pay for a redundant
employee is less than the statutory weekly amount, the lower amount is paid as statutory redundancy pay. The employer may make payment in excess of the statutory weekly amount by choice or by reason of a contractual provision. For the purpose of calculating a week’s pay, it is necessary to include: ● regular overtime, if the employee’s contract says they must get paid for it ● any bonuses or commission. In the circumstance that the employee’s pay changes from week to week, it is also a requirement when calculating a week’s pay to use the average weekly pay for the previous twelve weeks from the date the employee is made redundant. If the employee did not work for a whole week during that time – e.g. they were on holiday or off sick – an earlier week must be used. When calculating redundancy pay for those who are or had been on furlough their wages must be topped up to 100%. For example, if an employee’s weekly pay is usually £300 but they received 80% pay while on furlough, their redundancy pay must be their full normal pay of £300 a week. (For further examples, see https://bit.ly/2XOm70W.)
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| Professional in Payroll, Pensions and Reward |
Issue 63 | September 2020
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