Furlough wages may be used to calculate redundancy payouts due to loophole

FURLOUGHED workers could see redundancy payouts slashed by thousands due to a loophole in the scheme if they're laid off work. 

Employment lawyers say they have received plenty of calls from people whose bosses have tried to pay them less based on their furloughed rate of pay.

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The government told The Sun firms shouldn't exploit the scheme, but there is nothing explicit in the rules stopping businesses from taking this approach.

Kate Palmer, an employment lawyer at Peninsula UK told The Sun: "We have not had clear government guidance on whether redundancy pay can be based on one’s furlough pay.

"With the increase in redundancies being instigated at this time, no doubt this will be tested in tribunals over the coming months."

How businesses are exploiting the furlough loophole

The government's coronavirus job retention scheme is designed to keep people in work.

Jodie Hill, an employment lawyer at Thrive Law adds that employers may think they have a legal case for paying people less.

She said: "On strict interpretation of the law, employers should calculate redundancy pay based on the average of the previous 12 weeks wages."

But as this legislation was written before furlough, she agrees there is a grey area.

And she argues that most people agree to furlough to keep their jobs, not because they are expecting reduced redundancy pay.

She said: "On this basis I believe there will be many employees who... will pursue their employers for the difference in pay in the tribunal.

"Employers should also be wary of adopting this approach as paying the incorrect amount could also be seen as unfair by employees, causing them to challenge the fairness of the entire redundancy.

"Where they have over two years employment this may result in claims of unfair dismissal too."

'Employers should act responsibly'

A government spokesperson told the Sun: "During this difficult time, employers should act responsibly and only use the job retention scheme to protect jobs.

"We would urge employers not to use the job retention scheme to make someone redundant on less favourable terms than they would otherwise have received."

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