Redundancy and COVID-19
Updated: Jul 3
The effects of the UK lockdown and Coronavirus pandemic are putting businesses under increased pressure. Laura Moore, an employment solicitor from rradar, looks at the tough decisions some companies are having to make to save their businesses or face going into administration, with the loss of an entire workforce.
From the moment it was introduced, the duration of the Coronavirus Job Retention Scheme (CJRS) has been a matter of speculation. It was always intended to be a temporary measure, but businesses’ plans depended greatly on how and when the Scheme will be wound down. This has now been announced and the changes are considerably more gradual than had been expected.
What has changed?
If an employee has not already been placed on furlough, the final date on which this can happen will be 10th June 2020. This is to allow time to complete the minimum furlough period of 3 consecutive weeks before the first change to the scheme commences.
From 1st July, employers will have complete flexibility to bring furloughed employees back to work part-time. In particular, businesses and organisations will be able to decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them - and will be responsible for paying the employees' wages while in work.
For example, an employer could bring an employee back for two days a week. They pay the employee for the two days and the furlough scheme covers the other three. When claiming the Coronavirus Job Retention Scheme grant for furloughed hours, employers will need to report and claim for a minimum period of a week.
Until 1st August, the Scheme will carry on reimbursing employers up to 80% of the salaries of furloughed employees (the monthly cap of £2,500 per month remains the same) plus NIC and pensions contributions. From 1st August, employers will have to start covering the NICs and pension contribution and can no longer reclaim them through the scheme.
From the start of September, the percentage of salary that the Scheme reimburses will be 70% and the monthly cap will drop to £2,190 per month.
From 1st October, it will be 60%, and the cap will fall to £1,875 per month.
At the end of October, the Scheme will close for good.
How will employers be affected?
The extension of the furlough scheme will let businesses put off the final decision about redundancies until later in the year; this could give them the breathing space they need to re-open if possible and start to trade again, possibly bringing staff off furlough in stages as funds allow. However, some companies will either be forced to make job cuts to save their businesses or have no option but to go into administration, with the loss of the entire workforce.
Employers should think carefully about how many redundancies are needed, what the options are for avoiding them, and who will have the job of putting the redundancy consultation into practice.
This can help to pinpoint problem issues, enable support mechanisms to be implemented and make sure that sufficient resources are earmarked for the process to run as smoothly as possible.
Can redundancies be avoided?
Some employers will be in a position where they can avoid the need for redundancies by looking at possible alternatives. Discussions could be held about such measures as pay cuts, benefit reductions, unpaid leave, career breaks or enforced holidays for staff if it is anticipated that the situation could improve soon. This will, of course, depend on the employer and the sector in which they operate.
If redundancies are necessary, then an employer can ask for volunteers to avoid the unpleasantness of having to pick individuals to be made compulsorily redundant. It would not be considered sensible to offer voluntary redundancy only to those within the pool who are likely to be selected for compulsory redundancy if there are insufficient volunteers.
Doing so would give those who do not take up the offer and are then selected an easy argument on unfair dismissal. They could say their selection was predetermined, and that the selection and consultation exercise prior to their compulsory redundancy was not a genuine one. Therefore, if voluntary redundancies are going to be requested, it should be offered to everyone in the organisation.
Cutting the risk of redundancy claims
One of the most important things to think about when drawing up a redundancy plan is the threat of unfair dismissal claims and a successful plan will need to include ways to mitigate this risk.
A successful unfair dismissal claim can give the claimant up to 52 weeks’ gross pay in compensation (although there is a statutory cap). So, getting the process right is important.
The consultation timescale
For a successful redundancy plan, timing is everything. If more than 20 employees in one establishment are included in the redundancy process over a 90-day period, the employer will need to collectively consult with representatives of those affected employees for at least 30 days before the first of the dismissals occurs. This rises to 45 days if the number of dismissals is 100 or more.
The gradual nature of the end of the Scheme may make this difficult inasmuch as employers may not be certain about what will happen afterwards and therefore have no way of knowing if they will be forced to make some redundancies or dismiss their entire workforce.
However, many businesses, taking a realistic view of the situation, will know whether they will have to lose jobs in whatever quantity and so should start the consultation process as early as possible.
The main aim of consultation should be reaching agreement with the employees on what has been proposed. The consultation should also cover proposals for avoiding dismissals, as well as the ways in which the selection for redundancy will be carried out.
When more than 20 employees are at risk of redundancy, the employer may have to notify their employees’ chosen union within the workplace. Furthermore, the employer will be able to carry out a collective consultation process by way of employee or union representatives.
If an employee has been provisionally selected for redundancy, they must have an individual consultation with their employer, although this can take place at the same time as the collective consultation period.
Where an employee volunteers and then changes their mind before notice is given, the employer should not make the employee redundant because of their previously having volunteered. The employee, however, could still be selected in any subsequent compulsory redundancy selection exercise.
Although there is a sense of urgency when making decisions that could affect the long-term future of the business, employers should resist the temptation to look for short cuts, especially when issues of discrimination are involved.
The right of appeal
Employees who have been selected for redundancy should have the chance to appeal against their selection and to suggest alternative work they are willing and able to carry out. Where possible, the employer should look for such alternative work – whether on that site or, if possible, elsewhere in the organisation - before making the final decision on redundancy.
Employment rights and furlough
While employees are on furlough, they do not cease to be employed, and therefore, their employment rights continue to accrue. This will include length of service, which is something to remember when they return to work, or if they are selected for redundancy. For example, an employee who may have been just short of two years’ service when placed on furlough could have passed the two-year mark by the time redundancy is being considered, which will give them additional rights relating to this.
It is important for employers to remember, when planning the redundancy process, that if it involves long-standing employees, they will have long periods of notice which will need to be taken into consideration.
Always seek expert support
It is wise to seek professional legal advice when thinking about redundancies. This will give employers a specific understanding of how the redundancy process works and what is required to remain fully compliant. Carrying out the process professionally, with legal advice and with due consideration will ensure that the risks of legal action against an employer are reduced as far as possible.
If you are in a position where you are considering having to make redundancies, our rradarstation online articles, redundancy pay calculators and templates of letters to staff will provide in-depth information that will help you to decide what is best for your business, as well as showing you in more detail what you have to do in order to remain compliant with employment law and reduce the risk of claims for unfair dismissal.