United Kingdom: law to protect compensation paid to workers dismissed post-Covid

The UK government passed an emergency law on 30 July stating that an employee that was furloughed (placed on partial unemployment) during the pandemic but is subsequently fired must receive severance pay that is based on their initial salary. While the majority of companies do this regardless, the government found that a minority of employers have calculated severance pay – paid in the UK in the case of people who have worked continuously for an employer for at least two years – on the basis of the furlough allowance, which is lower because it is limited to 80 per cent of salary up to a maximum of £2,500 per month. “We urge employers to do everything they can to avoid making redundancies, but where this is unavoidable it is important that employees receive the payments they are rightly entitled to,” says the UK Business Secretary Alok Sharma. This legislative change, effective as of 31 July and not retroactive, also applies to the calculation of Statutory Notice Pay, when an employee has been notified of his future dismissal, as well as to the calculation of compensation for unfair dismissal, for example. Some 12% of the working population still benefit from the government’s furlough scheme, the UK Office for National Statistics said on 20 August. While 150,000 people have already lost their jobs, this figure could jump to 1.2 million by Christmas, according to the think tank National Institute of Economic and Social Research.