Please see below some frequently asked questions around this complex subject. We hope that you find this information useful!
When there is a prolonged downturn in business, this often leads to situations of lay off, short time working or in many cases redundancy. So, what has made the Government introduce new legislation from 30th July 2020 regarding redundancies? The short answer is Covid-19: –
- Can I make employees on furlough redundant?
Gov.uk’s Employees’ Coronavirus Job Retention Scheme (CJRS) guidance states that an employee can be made redundant while on furlough or afterwards, and that an employee’s redundancy rights will not be affected by being furloughed.
- Is there a risk to making staff redundant during the pandemic and before the Coronavirus Job Retention Scheme has come to an end?
Where the business is continuing, there is the potential for the dismissal to be unfair. You would be encouraged to talk to your Advisor before announcing the redundancy route to your employees so that your rationale can be explored as well as your capacity to move through the coronavirus period utilising other means i.e. lay off/ short time working or furlough which may be available to you.
- Will it be an unfair dismissal if an employer makes someone redundant rather than placing them on furlough?
As each case will turn on its own facts, this would be difficult to determine generally. Under section 98(4) of the Employment Rights Act, the test for reasonableness would be used and would consider the size of the employer and the resources available to it when determining whether the course of action taken was deemed appropriate.
It would potentially be reasonable that where an employer had evidence to support that it could not afford to furlough employees in March and pay the 80% of salary (pending HMRC opening the scheme on 20 April for reimbursements), that the redundancies would be seen to be fair but we anticipate that further evidence to support that employees had been consulted with, and had refused a deferred payment of wages would be needed to defend a claim for unfair dismissal in these circumstances.
Many businesses have closed during the Covid outbreak and other roles even in businesses that remain open have been genuinely eliminated. The fact that there may be a possibility that an employer may need employees in similar roles sometime in the future does not mean that an employer must furlough/continue to furlough employees. However, employers should be able to show that they have considered furloughing as an alternative to redundancy for each type of role they consider redundant, and document their reasons why it would not be suitable in the particular circumstances of the case. Similarly, if furlough was not viable and if the employer had alternative means to weather the storm (i.e. contractual lay off and short time working clauses), they would be expected to document their reasons why these means were not viable in the particular circumstances of the case.
- How is collective consultation carried out during furlough?
Whether the employer is able to meet this requirement when employees are furloughed and potentially without access to the means to participate in email communication or virtual meetings is unclear. It may be difficult for employers to provide the access and accommodation required while restrictions on movement remain, and the employer may not have sufficient technology available to provide access to employees who do not have access to a smartphone or the internet.
The employer would also need to ensure that meaningful consultation can take place with the representatives, taking into account the current level of restriction on movement. It may be easier to facilitate virtual meetings for a small group of representatives, but the employer should ensure that all of the representatives have access to the relevant technology, and that it allows proper consultation to take place.
- Can an employee on furlough be served with notice and what notice pay are they entitled to?
We are not aware of any reason that a furloughed employee could not be served with notice of termination of employment. HMRC has also confirmed that employers can continue to claim under the CJRS in respect of employees’ statutory and contractual notice periods.
- How should employers approach redundancy pooling where some employees are furloughed and others are not?
We consider it unlikely that the fact that some employees are furloughed should affect the employer’s identification of selection pools. Furthermore, we encourage a substantially sound rationale connected to pools, in particular when only furloughed groups are placed at risk.
In deciding whether a redundancy selection was fair, a tribunal must decide whether the employer’s choice of pool was within the range of reasonable responses. The usual approach is to consider the type of work, which is ceasing or diminishing, and which employees perform that kind of work. If the employer confined its selection pool to those already furloughed, this may be regarded as unfair because the selection process for putting employees on furlough may not have been as vigorous as is required where dismissal is being considered. We think it likely that the conventional approach of identifying those who perform the same or similar work (whether they are currently furloughed and therefore not performing that work, or not) should be adopted.
- Does scoring for redundancy change due to Covid-19?
Clients are advised to use objective criteria for redundancy selection, and to score those at risk against the matrix from the period running up to the Covid-19 outbreak and before furlough. This is to ensure that those furloughed are not disadvantaged. Many who were away from their roles during this time were absent due to childcare, age, or disability which adds to the risk of a discrimination claim. If in doubt about your process, please call your Advisor.
NB: When there is a redundancy, the employee is entitled to both redundancy pay (if they have over 2 years’ service), and notice pay in line with their length of service and contractual clauses of notice. (These must conform to statutory minimum notice periods – which, after two years’ service is a week for each full year of service up to a maximum of 12 weeks). Contractual notice may be more than the statutory minimum notice period, and where this is the case, you are obligated to fulfil the contractual notice.
- Can I claim notice back notice payments under the furlough SJRS?
- Is there anything which impact the rate of the notice pay?
Yes. There is a lesser known point of employment law which has bearing on whether notice is payable at full pay or a lesser amount. Essentially you need to compare the contractual notice you have stated you will give the employee for their particular length of service, against the statutory notice for the same length of service. For example:
|Length of service||Contractual notice||Required statutory notice||What is payable?|
|16 months||1 month
(3 weeks more than required by statute)
|1 week||Because the contract gives a week or more than the statutory notice, only the furlough pay is payable.|
|4 years||1 month||4 weeks||Full pay is applicable to the notice period because the contract does not give more than a weeks’ more notice than is required by statue.|
|3 years||4 weeks||3 weeks||Because the contract gives a week or more than the statutory notice, only the furlough pay is payable.|
Where the contract gives a week or more than a weeks more notice than is required by statue you may continue to pay at the furlough rate and will not be required to top this up to a “normal weeks’ pay”.
- can I claim back from the CJRS for notice pay?
Although the employee is entitled to notice at their normal rate, what you may claim back will depend upon the date of the redundancy and the framework of the CJRS during the period which immediately follows. Detail is currently as follows:
- The CJRS will remain at 80% contribution (£2,500 cap) for the hours the employee does not work. Meaning there is also a 20% deficit you will have to fulfil from the business.
- You will be required to pay the employers National Insurance and Pension Contributions.
- The CJRS will drop to 70% contribution (£2,187.50 cap) for the hours the employee does not work. Meaning there is also a 30% deficit you will have to fulfil from the business.
- The employer is required to pay employers National Insurance and Pension Contributions.
- The employer is required to top up 10% of the wage of non-worked hours (up to the cap of £2,500)
- and if working part-time, remains responsible for payment of 100% of pay for worked hours.
As above but…
- The CJRS will drop to 60% contribution (£1875 cap) for the hours the employee does not work. Meaning there is also a 30% deficit you will have to fulfil from the business.
- The employer is required to top up 20% of the wage of non-worked hours (up to the cap of £2,500)
- Can I enforce annual leave during a notice period related to redundancy?
In short, yes however, conditions apply!
Under Regulation 15(2) of the working Time Regulations 1998 you are required to give express written notice of the dates on which you are directing leave to be taken.
In compliance with the regulations, the notice must double the amount of notice as the days leave, you are requesting your employee to take. i.e. if you are directing 5 days, you will be required to give 10 days written notice of this. Contact your Advisor for specific wording or for them to draft your outcome letters.
- Can I claim back redundancy payments under the furlough scheme?
You cannot claim reimbursement of redundancy payments under the scheme (Employers’ CJRS guidance).
- My employees have been made redundant and have been on furlough on the run up to their redundancy. What do I base their redundancy payments on?
A change in legislation which came into effect on the 30th July 2020 means that employees made redundant while on furlough will be guaranteed redundancy pay based on their normal wage and not their furloughed rate under new legislation.
Under the change, furloughed workers would also be entitled to statutory notice pay equivalent to their normal wages, and any future unfair dismissal cases would be based on their full wages rather than pay under the furlough scheme, which can in some cases be substantially lower than an employee’s contracted pay.
Please talk to your advisor before you take any action.