Who is not entitled to redundancy pay and how is it worked out for staff who have been on furlough?

As we start to come out of lockdown, even if dealerships are doing well with people spending their cancelled foreign holiday money on cars, we are seeing that businesses have taken lockdown as an opportunity to review processes and further embrace digital technologies. These reviews are leading to restructures and redundancies. 

For those businesses who find themselves in the unfortunate position of making redundancies, we have produced a redundancy pack for our members which sets out all the necessary steps to be taken to ensure they go through a fair process and which will help them avoid an Employment Tribunal claim. 

For anyone who has been employed less than 2 years, there is no entitlement to a redundancy payment and neither does the employer have to go through any set procedure. This is mainly because, unless there is an exemption such as discrimination or whistle blowing (which is likely to cover any employee who reports their employer for furlough fraud), anyone employed under 2 years does not have the right to make an Employment Tribunal claim for unfair dismissal.

However, even if they have been employed for less than 2 years, they will have the right to make a claim to an Employment Tribunal for Wrongful Dismissal (which is different to unfair dismissal). This means they must be paid what is due to them including any holiday entitlement they have built up while on furlough plus their normal notice period (normally a week in this scenario unless the contract says different).

For those who have been employed for over 2 years, they will be entitled to a redundancy payment in addition to their accrued holiday pay and notice period. If there is nothing in the contract in regard to redundancy pay, they are entitled to the statutory minimum. This can be worked out very easily via the Government calculator. Normally for those who are on commission, their weekly pay (which is a required field on the calculator) is based on an average of the last 12 weeks wages. However, for those who have been on 80% furlough with a £2500 cap, the last 12 weeks wages may not reflect what they normally take home. While the furlough guidance is silent on this, we have checked the wording of the Employment Rights Act 1996 and that refers to a working week’s pay and so as those staff will not have been working while on furlough, we suggest the relevant 12 week period for them in regard to calculating redundancy pay, is the 12 weeks prior to being furloughed.  

It is important to get both the process (for those with more than 2 year’s service) and the payment right if you want to stay out of an Employment Tribunal and so if you are a member and have any questions please contact us to talk it through and if you are not yet a member, if you sign up to get support on this process, you will also get access to all year round phone and casework support on employment, consumer and any other motor trade related legal issues plus access to our award winning HR Manager software which makes HR a breeze.