Coronavirus: The redundancy pay loophole for furloughed workers explained

Coronavirus: The redundancy pay loophole for furloughed workers explained

Published at 8:43am 30th July 2020. (Updated at 10:40am 30th July 2020)

New laws are to guarantee that furloughed workers who lose their jobs will receive redundancy payouts based on their full salaries.

Sky News takes a look at what is being brought in and what it means to the millions of workers sweating over their income security as the coronavirus crisis drags on.

What is happening?

The government is rushing to close a loophole it admits some employers have taken advantage of, that has allowed them to cut furloughed staff and pay redundancy based on 80% of wages - currently covered by the Treasury's Job Retention Scheme.

That scheme is being gradually wound down from next month and closed in October so ministers want to ensure people get what they should be entitled to.

Basic awards for unfair dismissal are to be also based on full pay rather than the 80% of wages covered under the scheme to ensure no-one is short-changed.

How many people could this affect?

The unprecedented furlough scheme has seen more than a million companies secure aid to support up to 9.5 million workers' pay since the UK's lockdown was implemented.

There are no official figures covering how many furloughed workers have lost their jobs to date.

However, the latest ONS data suggests almost a third returned to their jobs in the first two weeks of July as the crucially important hospitality sector started to reopen.

So what is the law when it comes to redundancy pay?

The payout rules are based on age and length of service.

An employee under 22 years of age must get at least 50% of a week's pay for each full year of employment.

An employee aged under 41 and above 21 must receive at least one week's pay for each full year of employment.

An employee who is 41 and older must receive 1.5 weeks' pay for each full year of employment.

I am a furloughed worker and I fear for my job

The chancellor has already announced that businesses will be paid a £1,000 bonus for every furloughed worker who is reinstated.

The incentive forms part of the government's efforts to ensure as many people as possible keep their jobs.

The law adjustment on redundancy pay effectively forces additional costs on businesses who were looking to utilise the loophole.

How bad could it get?

Official figures have shown a steep fall in company payrolls since March - with data covering June suggesting 649,000 had lost their jobs during the lockdown despite the wage support and wider lending schemes for businesses.

Economists have warned the UK is facing down its worst crisis for employment since the 1980s, with the Office for Budget Responsibility forecasting an unemployment rate of around 13% by the year's end.

That would leave three million without work.

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