COVID-19: details of The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020

Although many employers have based employee’s termination entitlements on what the employee would normally receive rather than the reduced rates they have received while on furlough, this has not been the case universally and therefore the government has legislated to put the position beyond doubt.

The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 came into force on Friday 31 July. They set out how a week’s pay is to be calculated for employees who have been furloughed for the purposes of calculating:

• any statutory compensation for unfair dismissal
• any statutory redundancy payment
• any statutory notice payment (where the employee is entitled only to statutory minimum notice or their contractual entitlement is less than a week) more than the relevant statutory minimum notice period
• any statutory remuneration for time off to look for employment or arrange training
• any statutory sum resulting from a failure to provide a written statement of reasons for dismissal and
• any statutory sum resulting from a failure to comply with an order for reinstatement or re-engagement

The aim of the legislation is to ensure that employees do not miss out on their full entitlements as a result of being put on furlough.

Where the employee has normal working hours

A week’s pay is the amount payable under the contract of employment in force at the calculation date as if the employee had worked their normal working hours and the amount which is payable disregards any reduction in pay as a result of being furloughed i.e. the figure which must be used is their normal pay, not their furlough pay.

Where the employee does not have normal working hours

In this situation, the amount used for calculating entitlement for weeks when the employee was on furlough,  will be the reference salary which was used for the purposes of their furlough pay claim for that employee but it will be the full reference salary not the 80% claimed for under the scheme. Also, it will be the full figure which is applied – the Coronavirus Job Retention Scheme cap of £2500 is ignored.

The regulations will not apply retrospectively.