Redundancies during Furlough

Following the recent government announcements, you will no doubt be starting to think about what your business might look like after lock-down and how you might operate and survive in the future months.

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Although it is not pleasant, you may need to consider making some redundancies. As such, we have put together some frequently asked questions, please see below.

At what stage can you start a redundancy process when someone is on furlough leave? Do you have to end their furlough first?

You can start a redundancy process at any stage, including the period when employees are on furlough. Furlough does not have to be ended before starting the redundancy process.

The Coronavirus Job Retention Scheme (CJRS) is designed to minimise redundancies, but employers can still make staff redundant during or after furlough. The redundancy process can be commenced at any time provided the correct procedures and consultations are followed.

Will it be unfair if I make an employee redundant rather than placing them on furlough leave?

If the redundancy is solely proposed because of the current situation regarding the Coronavirus, then it is likely to be unfair to not at least thoroughly consider the possibility of furlough rather than making an employee redundant, since such action would potentially be deemed unreasonable in the circumstances. Employees can claim unfair dismissal if they have two or more years’ service.

However, if a redundancy consultation process was ongoing prior to the onset of the Coronavirus crisis, and/or the situation is not affected by the Coronavirus, it is very likely that it will still be possible to fairly dismiss an employee for redundancy, notwithstanding the availability of the scheme.

Instead of making redundancies, can I reduce employee salaries, and change or remove other benefits they receive?

A reduction in pay, change in pay or other terms and conditions, constitutes a change to terms and conditions and therefore consultation should be carried out. 

If an employee doesn’t agree to a change in their salary, and you do go ahead and make the deduction in their pay, you could be at risk of unlawful deduction from wages claims. There is no qualifying period, so it is a day one right. 

However, they may be willing to make these changes on a temporary basis as an alternative to redundancy.

For redundancy consultation do normal timelines apply or is this a special case?

The government has confirmed that the Coronavirus pandemic is unlikely to qualify as a ‘special circumstance’, therefore all current employment law obligations still stand. As such, if redundancies are unavoidable, the safest approach is to follow normal redundancy procedures, consultation and timelines.

Do I need to collectively consult with my employees?

Collective consultation is required if you intend to make 20 or more employees redundant at one establishment within a 90-day period.

If you do, then there is an obligation to follow the government guidelines around collective consultation and the designated timelines are as follows:

  • 20 – 99 redundancies proposed = minimum 30-day consultation period.
  • 100+ redundancies proposed = minimum 45-day consultation period.

The collective consultation should be completed before any notices of termination of employment are served. Failure to consult collectively could result in being instructed to pay additional payments to each individual affected. These are called ‘protective awards’ and could be up to 90 days’ extra pay each.

If you intend to make 19 or less employees redundant, then there are no set timescales around consultation and the redundancy process. The guidance states that this should be a ‘reasonable’ amount of time to allow effective consultation and to follow the redundancy process. Depending on the circumstances, this can be as little as a week (potentially less for someone with short service).

If I need to consult with my employees whilst they are furloughed, how do I do this?

Redundancy consultation does not class as work and therefore employees on furlough can engage in a consultation process without it affecting their furlough leave, or your claim.

Consultation meetings can be held virtually via Skype or Zoom if necessary (provided employees have and can use the requisite technology).

What is redundancy and notice pay calculated on, if an employee has been furloughed?

Redundancy and notice pay should be based on normal contractual pay and not the amount received if they have been furloughed.

What happens to the employees notice period if they are kept on the furlough scheme?

You can keep an employee on furlough (and claim from the CJRS) whilst they ‘work’ their notice. However, you will need to top this up to full pay for the duration of their notice period. 

If you pay notice in lieu, you will not be able to claim this from the CJRS.

Redundancy payments cannot be claimed for under the scheme either.

Can I re-hire employees so that they can benefit from the furlough scheme?

Once notice has expired and an employee’s employment has ended (including entitlement to benefits and holidays), you could choose to re-engage them for the sole purpose of placing them back on furlough and enabling them to claim the furlough allowance from the government. 

The employee’s employment end date would remain the same, but they would not have continuous service, nor would they be entitled to any benefits/accrual of holidays. It is strongly advised that an agreement of this nature is made explicit in a signed agreement with the ex-employee.

Since employees have been furloughed, some of the requirements of the roles have changed. Can I change the role when the employee returns to work?

If the requirements of the role have significantly changed it could constitute a redundancy situation, which would require you to consult and follow the normal redundancy procedures.

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