Legal update: Furlough and statutory payments

On 31 July, the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 came into force. The regulations stipulate how a week’s pay is to be calculated for an employee who is, or has been, furloughed for the purposes of statutory payments. This includes statutory redundancy pay, statutory notice pay, unfair dismissal compensation and other statutory payments connected with the termination of employment.

The regulations have been put in place to ensure these payments are based on the employee’s normal pay as opposed to their reduced furlough rate. 

There are various ways to calculate a week’s pay in relation to statutory payments and each is subject to the weekly statutory cap of £538. 

The regulations stipulate the following:

• If the employee’s normal working hours and pay does not vary with the amount of work done, the amount of a week’s pay, in relation to any period when the employee is or was furloughed, is to be calculated disregarding the reduction made as a result of the employee being furloughed. 
• If the employee’s normal working hours and pay varies with the amount of work done, the amount of a week’s pay is to be calculated at the average hourly rate of pay during the relevant period (ordinarily the 12 weeks prior to the date of calculation). If the employee was furloughed during the relevant period, any reduction is to be disregarded.  
• If the employee’s normal working hours and pay varies according to time of work, the amount of a week’s pay is the average number of weekly normal hours at the average hourly rate during the relevant period. If the employee was furloughed during the relevant period, any reduction in the average hourly rate is to be disregarded.
• If the employee has no normal working hours, the amount payable is the average weekly pay in the relevant period. 

These regulations apply if the statutory payment calculation date is on or before 31 October 2020 when the Coronavirus Job Retention Scheme is due to close.


Joanne Galbraith-Marten
RCN Head of Legal (Employment)