Furloughed workers will be guaranteed redundancy packages based on their normal wages if they lose their job, under a law to stop businesses from offering them reduced payouts.
In an intervention designed to stop unscrupulous employers, ministers will introduce the law on Thursday to protect workers on the coronavirus job retention scheme .
The legislation will ensure that furloughed employees receive statutory redundancy pay based on their normal wages, rather than the lower 80% rate offered on the government wage subsidy scheme.
As many as 9.5m jobs have been furloughed at 1.2m companies since March, with workers receiving at least 80% of their usual wages, up to a limit of £2,500 per month. Some employers have chosen to contribute to keep furloughed staff on full pay.
Britain’s economic recovery from Covid-19 has been slower than first hoped, amid the continuing risks from the virus as lockdown measures are gradually removed this summer.
Growing numbers of companies have started making redundancies, particularly in sectors hardest hit during lockdown, such as aviation, retail, hospitality and leisure.
The government said that while most companies were offering workers normal redundancy packages, a minority were attempting to offer their staff a less generous payout based on the 80% furlough wage.
Alok Sharma, the business secretary, said the new legislation would be brought into force from Friday: “New laws will ensure furloughed employees are not short-changed and are paid their full redundancy pay entitlement – providing some reassurance in an undeniably testing time,” he said.
Employees with more than two years’ continuous service who are made redundant are normally entitled to a statutory redundancy payment based on length of service, age and pay, up to a statutory maximum.
Frances O’Grady, general secretary of the Trades Union Congress, said it was right for workers to get full redundancy pay, but warned ministers to be more focused on stopping job losses in the first place.
“Prevention is better than the cure. We urgently need targeted support for hard-hit industries, and extension of the furlough scheme beyond October for those who need it,” she said.
“Without this, we risk an avalanche of redundancies in the autumn and undermining the economic recovery.”
From August, the government will begin tapering the level of support on the furlough scheme, asking companies to contribute in order to continue receiving state support for furloughing their staff. It will be closed entirely by the end of October.
The government’s economics forecaster, the Office for Budget Responsibility, has estimated more than a million jobs will be made redundant when the scheme closes.