A new Statutory Instrument came into effect on 25 April 2020, which deals with the calculation of an employee's “average weekly earnings” for the purposes of statutory parental pay entitlement for those employees who have been furloughed during the relevant period – SI 2020/450.

Background

Entitlement to Statutory Maternity Pay, as well as Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay, is calculated based on an employee’s average weekly earnings (AWE) over an 8-week assessment period (the Relevant Period). 

Prior to the introduction of this Statutory Instrument, the legislation was clear that the basis for the calculation of an employee's AWE was the actual sums paid to the employee over the relevant period, rather than whatever may be “normal”.

If an employee had been furloughed for all or part of the Relevant Period, their AWE would reflect any reduction in their normal earnings as a result of their furloughed status.

The New Regulations

This Statutory Instrument corrects the position and clarifies that an employee’s AWE should be calculated based on the pay the employee would have received had they not been furloughed.

This applies where an employee has been furloughed for all or part of the Relevant Period, their earnings are lower than they would otherwise have been as a result of them being a furloughed employee, and their employer has claimed and is in receipt of financial support under the Coronavirus Job Retention Scheme. 

The first day of the family-related pay must begin on or after 25 April 2020.

This move is intended to ensure that those taking time off following the birth, adoption, or death of a child will not see their entitlement to statutory payments affected as a result of being furloughed during the Relevant Period. 

We have a dedicated Covid-19 team of employment lawyers keeping up to date on the latest developments and who are available to answer any questions you may have. You can find more information here.