How to approach redundancy as the furlough scheme winds down
As the Government furlough scheme starts to change in preparation for it to end in October, inevitably we will see a rise in redundancies as businesses struggle to recover from lockdown.
How employers approach redundancies during a difficult time will be key to avoiding employment tribunal claims in the future. These Q&A’s have been designed to help employers who will undoubtedly have to make some difficult decisions in the coming weeks.
Can employees be made redundant while on furlough?
Yes, but selecting an employee for redundancy because they are furloughed, is very likely to result in that employee being unfairly dismissed.
Is it unreasonable to make redundancies while furlough leave is still an option?
No, if business has fallen to such a level that there is not enough work for all of your employees to do, then it is likely to be reasonable to make redundancies.
Are there other options to consider first?
Yes. Given the unique situation caused by Covid-19, employees may be more open to exploring different options, such as pay cuts, reductions in hours or taking unpaid leave. This might enable some employees to remain employed without pay until the situation improves and redundancies may no longer be necessary.
Do the usual rules on collective consultancy periods apply for any redundancies made because of Coronavirus?
The rules around both collective and individual redundancy consultation have not changed and the employer is still required to comply with them.
If an employer is proposing to dismiss 20 or more employees in a 90 day period, they need to collectively consult with the affected employees for at least 30 days before the first of the dismissals take effect. This increases to 45 days if 100 or more dismissals are proposed.
Consultation should aim to reach agreement with the employees although agreement does not have to be obtained and should always start before a final decision about redundancies has been taken. So, if businesses are aware now that job losses are going to be required or are likely to follow the end of the furlough scheme, consultation with potentially affected employees should start now.
Employers will need to give careful consideration to who is in the pool of potentially redundant employees and not automatically place all furloughed employees into the pool for selection.
The fact that an employee has been furloughed should not be used as an indication that their role is not essential. Certain groups, such as parents and those who are shielding, are more likely to have been furloughed due to childcare or medical reasons, automatically placing all of these employees in to the redundancy pool could lead to claims for discrimination.
When notified of their potential redundancy risk employees should be given the opportunity to challenge their selection, suggest alternatives to redundancy and where possible, alternative roles should be sought within the organisation or any wider group. Employees should also be given the right to appeal against their dismissal.
Can we make furloughed employees redundant and still claim the grant?
It is important to remember that the underlying purpose of the furlough scheme is to allow employers to maintain their workforce, so there is some risk that HMRC will question rapid redundancies. The furlough guidance for employers was updated on 25th June to include this statement ‘integral to the purpose of the scheme is that the grant be used by the employer to continue the employment of employees’.
Although employers are ‘continuing the employment’ of their employees during redundancy consultation and notice periods, one possible (but unlikely) interpretation of the new wording is that employers should only use the scheme for as long as they are trying to retain jobs and should stop using the scheme once they intend to make redundancies.
However, in the absence of any definitive guidance the most likely interpretation is that employers can continue to use the scheme during both redundancy consultation and notice periods.
Am I at increased risk of an unfair dismissal claim while furlough is available?
Employees with two or more years’ service can claim unfair dismissal but redundancy is a potentially fair reason for dismissal. The fairness of a redundancy dismissal depends on all the circumstances at the time, so it is not necessarily unfair to make employees redundant when furlough is available.
What notice pay is an employee entitled to on furlough?
The rate at which a furloughed employee is paid for their notice is dependent on the length of their contractual notice period and whether it is more or less than statutory and whether they have normal hours of work or not.
Please do get in touch if you have any questions or need specific advice relating to your business. We are here to help and support you. Please call Sean on 01225 750 000 or email email@example.com