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How to approach redundancy during furlough



The government decision to extend the furlough scheme until March 2021, may have saved many businesses from having to make redundancies for now but inevitably we will see a rise in redundancies as the extended scheme comes to an end next year.

In addition those employers that had made the difficult decision to make staff redundant in preparation for the original end of furlough find themselves in the unprecedented situation of wanting to re-hire valued staff in the hope that by March 2021 they will be in a position to keep them.

How employers approach redundancies now will be key to avoiding employment tribunal claims in the future. In his latest article Employment Partner, Sean McDonough answers some key questions designed to help employers who will undoubtedly have to make some difficult decisions in the coming weeks.

Can I re-hire?

Yes, guidance issued when furlough was extended, stated that if employers wish to, they could re-employ anyone made redundant and furlough them provided they were employed and on their payroll on 23 September 2020.

Can employees be made redundant while on furlough?

Yes, but selecting an employee for redundancy just because they are furloughed, is very likely to result in that employee being unfairly dismissed. 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.

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.

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.

Furlough employees should not be penalised when applying performance based selection criteria and pre furlough performance should considered rather than any gaps in performance as a result of furlough.

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. In November the government updated their guidance to add:

‘The government is reviewing whether employers should be eligible to claim for employees serving contractual or statutory notice periods and will change the approach for claim periods starting on or after 1 December 2020, with further guidance published in late November.’

This addition suggests that the rules about making furloughed staff redundant and using the furlough grant to fund their notice period will change soon.

If you are considering making redundancies over the next few weeks or months, you may need to rethink your timing as it looks as though you’ll need to serve notice before 1 December if you want to benefit from the furlough grant. That doesn’t give you much time if you also need to collectively consult.

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 sean.mcdonough@mogersdrewett.com