Making Redundancies During Furlough
We’ve all been on an incredible journey this year, and not one we would like to take again, that’s certain. However, what’s not so certain is how businesses will be able to operate going forward. The overriding question for many employers at the moment is “Can we make redundancies, whilst employees are furloughed?”. Despite the Coronavirus Job Retention Scheme, making redundancies during furlough is becoming more common.
We still have many unknowns to deal with and, as an employer, you may be asking questions such as:
- When will we start to see an increase in sales?
- When we will be able to source the materials needed to manufacture our products?
- When can our employees start visiting customers?
- Is our order book likely to increase sufficiently in the foreseeable future to avoid the need for redundancies?
As we know, employers have been able to access the Coronavirus Job Retention Scheme (CJRS) to receive financial support in the form of a grant to be able to pay employees 80% of their pay. Rishi Sunak, Chancellor of the Exchequer confirmed in a tweet on 2nd June 2020 that 8.7 million jobs have been protected by this scheme so far, which was brought into place originally to protect jobs. The Coronavirus Job Retention Scheme was positioned as:
“enabling employers to retain employees who would otherwise have been made redundant as a result of the economic consequences of COVID-19”.
This was further extended to:
“help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy”.
The Government has announced changes to the Coronavirus Job Retention Scheme, briefly detailed below:
- From 1st July 2020, employees can return part-time and still be furloughed and receive 80% of their pay for furloughed hours.
- Please note to be eligible for point one, employers must place employees on furlough by 10th June 2020, this is the last date to enter the Coronavirus Job Retention Scheme. This will also allow for an employee to return back to work part-time from July under the Flexible Furlough Scheme.
- From August, employers will be required to pay employer national insurance contributions and pension contributions.
- From September, employers will be required to pay 10% of wages in addition to point 3.
- From October (the last month of the scheme), employers will be required to pay 20% of wages in addition to point 3.
More details will be published on 12th June 2020.
Redundancy and Furlough
At this stage, we are seeing an increase in the number of employers making redundancies despite having the “furlough scheme” in place. Employers have been able to retain employees with the help of the CJRS longer than they would normally have been able to. The benefit of retaining employees for as long as possible allows flexibility with the business during the ever-changing impact of coronavirus. Keeping skilled and experienced employees is key to driving the business forward.
Employers have to consider employee costs and normal business operating overheads along with the amount of financial support available. Balancing this against the correct number of employees required in the workforce to meet forecasted sales is a further consideration and not an easy one.
If an employer makes too many employees redundant then it risks losing efficiency and incurring extra costs to deliver its products or services. Cutting a workforce back too tightly can impact the performance of the operation. Where employees are absent for various reasons, such as annual leave or sickness, this can increase the workload of those remaining. Risks associated with high workloads include workplace accidents, errors, performance issues and poor customer service. Further, employee absences may increase due to stress, and most importantly, employers may lose key employees.
Not making the correct number of redundancies will potentially lead to a second or third round of redundancies. The impact of further redundancies on employees will reduce employee engagement and loyalty to the company. There is significant time involved in managing a redundancy procedure, so getting it right is important otherwise valuable time will be used to repeat the process again.
This is not to say that a second round of redundancies won’t necessarily be required at a future date. Our advice to employers is to invest your time into analysing the current situation as best as you see fit.
Identifying Which Employees to be Selected for Redundancy
First, employers must remember it is the ‘role’ that is redundant (not the person).
As an employer, if you need to consider making redundancies during furlough you should consider the areas of the business, where there will be reduced work or where the type of work may change. As an employer, you must identify your ‘pool’ for redundancy, and this is key – get this wrong and you risk unfair dismissal claims and potentially even discrimination claims. If the latter were to prove successful, this could lead to unlimited compensation.
Employers need to identify the correct criteria for scoring employees. Employers will need to retain reliable, productive and multi-skilled employees.
If an employer uses absence within the criteria, then care must be taken to identify which absences should be excluded from the scoring to avoid discrimination claims, such as pregnancy and disability.
Redundancy is defined under s.139 of the Employment Rights Act 1996 and is a potentially fair reason for dismissal. However, employers must also act fairly in the circumstances as set out in s.98(4) of the Employment Rights Act 1996.
There are certain reasons that, if applied, will deem a redundancy to be ‘automatically unfair’, such as selecting an employee for redundancy because she is pregnant. There are other reasons, so please be mindful of these.
Careful consideration should also be given to making redundancies during furlough because there is the potential of it amounting to an unfair procedure. The extra time employees remain employed because of furlough could allow for changes that save roles. Equally, not making redundancies during furlough could result in a further financial cost to the employer which could increase the number of redundancies to be made.
Hopefully, this blog will make you aware of the necessary considerations required as part of a redundancy process that you may have to undertake.
Redundancy is a difficult process to manage and involves significant time to complete. We are here to help, advise, and manage your redundancy process for you. Whether you need a little bit of HR advice or full hands-on redundancy management, we are ready to support you.
Timing Considerations for Redundancy Processes
As an employer, once you have outlined your business case for redundancy, you will need to announce this to the affected employees or possibly the whole workforce. However, if you have employees on furlough, then you need to consider how you will manage communication in respect of the redundancy consultation process. Employers must consider how much extra time is required during the redundancy process to effectively consult with furloughed employees. There are several options including by phone, video conferencing, or in-person (with social distancing measures in place).
Where an employer proposes to dismiss 20 or more employees as redundant, they are required to enter into collective redundancy consultation. This process involves electing representatives and a ballot will also be required. There are also minimum consultation timeframes involved which are in addition to the time taken for an election process to be completed. For example, if employers are proposing to make 20-99 redundancies then a minimum consultation period of 30 days is required and employers must be careful to consult on the required elements.
Whilst, not a statutory right, it is best practice to allow employees to be accompanied in the redundancy consultation meetings. As an employer, you will have to factor the time element for this into your agreed method of communication.
In a nutshell, as an employer, you must ensure there is a genuine redundancy situation. You will need to take care when identifying the pool for redundancy. You will also need to take into account the additional time that will be required for a meaningful redundancy consultation for employees who are furloughed.