Understand how the COVID-19 pandemic and the Coronavirus Job Retention Scheme impacts on redundancy procedures
The Coronavirus Job Retention Scheme (CJRS) (or ‘furlough’ as it is more commonly known) is due to end on 30 September 2021. The scheme has provided much needed support during the pandemic, acting as a ‘life line’ for many business owners. Whilst business is returning to normal for many companies, a significant number of employees remain on furlough, as employers continue to need the support.
Now is the time, if not already planned, for businesses to address what they will do if they are unable to accommodate employees working their full hours on their contractual terms once the scheme ends.
Companies may assume that making redundancies is their only option. However, there may be alternatives to consider before going down the redundancy route (as outlined below).
If redundancy is the likely decision, it is important not to assume it is ‘just a case’ of making those on furlough redundant and it all ‘just happening’ on the last day of September. There are consultation and selection processes that will need to be followed and timescales to be allowed for.
Being on furlough may not be a fair reason for redundancy. Companies would need to establish appropriate selection pools and criteria (see below). Failure to do so is risky and could lead to costly employment tribunal claims and reputational damage.
Read our 10 top tips if you’re considering what to do once the furlough scheme ends
1. Define your business rationale as a proposal
Any consideration for making employees redundant must start with the business reasons or rationale for making the change.
It can be useful to set this out on the basis of explaining (as a business or the team or activity affected):
- Where we’ve been
- Where we are
- What we need to do and why
- What we propose and alternatives we have considered
It’s also important to have this proposal clearly set out and documented. Always think that you could be faced with having to defend an employment tribunal claim - a judge is going to want to know and see your reasoning. Don’t underestimate the importance of documentation. It’s likely that some of the detail of what you thought and said will be forgotten if you’re faced with an employment tribunal many months afterwards.
2. Consider other options
Redundancy can often be an automatic response to reduce cost within a business. But other options can save money (by not having to pay redundancy and notice pay), can secure jobs, skills and experience in the longer term, provide more efficiency and enable a better employee experience.Consider the following:
- Promote opportunities for making statutory flexible working requests (for example reduced hours), before raising discussions about redundancies.
- Offer unpaid sabbatical or career breaks, returning when hopefully business has picked up.
- Look into external secondments for work experience at other companies, paid for by the other employer, where businesses work in partnership. These can be of mutual benefit, including development for the employee. - Look into external secondments for work experience at other companies, paid for by the other employer, where businesses work in partnership. These can be of mutual benefit, including development for the employee.
- Reduce any agency workers or self-employed workers carrying out similar work
- Review or consult on introducing new working patterns (especially if revised hours patterns have operated on flexible furlough), rosters, reconciliation periods and overtime rates, that will better meet business need, whilst preserving jobs. - Review or consult on introducing new working patterns (especially if revised hours patterns have operated on flexible furlough), rosters, reconciliation periods and overtime rates, that will better meet business need, whilst preserving jobs.
- Invoke short time working and lay off clauses if contained within the contract of employment. This will enable employers to use a similar scheme to ‘furlough’ for a temporary period in the hope that the business recovers, although there would be no Government funding (see point below for more).
- Offer voluntary redundancy to employees, to avoid a compulsory redundancy process. There may be employees who, having not been in work and on furlough, may want to consider voluntary redundancy.
3. Make use of short time working and lay off
Short time working or lay off is an alternative to redundancies, especially if reduced or fluctuating workload is expected for a temporary period and an employer does not wish to lose valuable employees, skills and experience. In a similar way to furlough this could give businesses some time to see if usual business need will resume and avoid redundancies.
Short time working allows reducing working hours on a temporary basis, while lay off entails sending an employee home temporarily if there is no work. Employees may be entitled to statutory guarantee pay of up to £30 per day for a maximum of 5 days (£150), which the employer must pay.
Implementing short time working and lay off as a means of avoiding redundancies should be viewed as a temporary measure and must either be expressly allowed for in contracts of employment or agreed to.
Seeking employee agreement to agree changes to existing contracts of employment or drafting clauses into contracts for new employees might be something for an employer to consider, especially where there may be uncertainty, fluctuating business demand and furlough will no longer be in place to rely on.Used appropriately and fairly, short time working or lay off can help employers avoid the need to make redundancies and secure jobs for the longer term.
4. Don’t underestimate the cost of redundancy pay and notice
An employer needs to consider potential redundancy costs before embarking on a redundancy process. You should be aware of the total cost of redundancy pay and notice period/pay, especially if older employees and/or those with longer service are at risk. It may be that the business can’t afford the costs and a better option is to retain talent in the longer term.Redundancy Pay is factored by age and service and capped amount and is tax free up to £30,000. Statutory redundancy only payable for 2+ years’ service.
Redundancy Notice – statutory (1 week for each completed year of service up to a maximum of 12 weeks) or contractual notice, whichever is the greatest must be paid. Payments are taxable. Once redundancy is confirmed, the employee should be advised and have confirmed in writing their notice to be worked, if they are being placed on garden leave or if they are being paid in lieu of notice, or a mixture of the above.
Check that you have a contractual right to invoke garden leave or pay in lieu of notice by checking the contract of employment. If there is not the contractual right to do so, then there is a breach of contract risk. This would mean that an employer would not be able to rely on any post termination clauses such as confidentiality and restrictive covenants.
Redundancy and notice payments must be based on an employee’s standard wages not reduced furloughed wages and the furlough grant cannot be claimed nor used towards notice pay or redundancy pay once formal redundancy notice is served.
5. Think about selection criteria – what’s best and what to avoidUnless an employee is the only person carrying out their role and nobody else has been doing their work, then an employer is likely to have to put selection criteria into place to select for compulsory redundancy
Ultimately, a line manager (and/or HR) has to discriminate between individuals to be able to select somebody for redundancy but it must not be unfair discrimination. Criteria must be fair, objective and reasonable, not directly or indirectly discriminatory in breach of the protected characteristics and not grounds for automatic unfair reasons for dismissal. For example an employee asserting a statutory right such as making a request for flexible working.
Usual selection criteria include technical knowledge, skills, experience and qualifications. You can use evidence from performance reviews and skills matrices to support your decision. However, be mindful that employees on furlough may not have been working and therefore limited evidence will be available in the same period as those who continued to work. If the reasons for furlough were childcare or because the employee was clinically vulnerable, there could be discrimination risks too.
Using the number of days sickness absence as a criteria to select for redundancy should be done with caution, if at all, to avoid risks of discrimination. Risk can arise where sickness absences of, for example, a pregnant employee or an employee with a disability are included, without any reasonable adjustments being made.
Always consult on the proposed criteria to be used, allowing employees to challenge before carrying out the scoring process. Consult with employees on any changes made and have at least two people to score, such as managers or with HR.
6. Get ‘ring fences’ or selection pools rightPutting into place an appropriate ‘ring fence’ or selection pool is a key factor in any redundancy process. Typical situations when ring fences or pools may be needed include:
- Stand-alone role and only one person doing the job – if only one person carries out the work there would be only one person in the ring fence.
- Stand-alone role but work has been carried out by others – those carrying out the work, who could be in different roles, may also need to be placed in the ring fence with the employee whose job it is, who may be on furlough.
- Multiple people doing the same role - all those carrying out the work must be put in the ring fence. An employee on furlough cannot be the person automatically selected for redundancy.
Common mistakes are made where an employer fails to put other employees in a ring fence and selection for redundancy, pre-judging the outcome that somebody may be the best person for the job based on skill and experience and jumping straight from ‘A to B’ without going through a fair process to get to ‘B’.
7. Remember what consultation really means
The process for consultation will depend upon how many employees are at risk of redundancy. Consultation can be carried out on an individual basis where there are under 20 employees proposed to be made redundant in a 90 day period. If there are 20 or more employees to be made redundant, a more detailed collective consultation process has to be carried out.
With many employees continuing to work from home or on furlough, consultation and communication may need to be carried out by video/phone rather than in person. Documenting discussions during the consultation process continues to be important and may need to be relied on during any appeal or employment tribunal claim.
8. Stop and consider alternatives before making somebody redundantBefore confirming a redundancy it is important to check that there is no suitable alternative role that the employee could be offered, even if on a lower salary.
It is their choice to decide whether to take the job (which they would have a legal right to do for a trial period of 4 weeks). It is not for the employer to make that decision for them or withhold the opportunity.
A manager/HR should check if there are current or proposed vacancies in other teams. An employee at risk of redundancy would have a right to the role if it was suitable and be placed above any other candidate (whether external or an internal candidate to be promoted).
Remember that employees on maternity leave in a ring fence or at risk of redundancy are protected. Regulation 10 of the Maternity and Parental Leave Regulations 1999 provides the right to be offered a suitable alternative job, even if the person may not be the best performer or if they would likely to have been selected for redundancy during a selection process.
9. Recognise the importance of GDPRIt is increasingly common that an employee making, or anticipating to make, a claim for unfair dismissal will be advised to submit a Subject Access Request (SAR) under GDPR. An employer has a responsibility to respond to this request.
It is important that employers do not prejudge outcomes of redundancy processes, nor send emails to co-managers or directors on the basis of employee name ‘will be made redundant, prior to a fair process being carried out. With more people working from home, documents like emails sent between managers, pre-determining selection criteria scores, or recorded details on a spreadsheet with the employee name in advance of the scoring stage, would likely be disclosable under a SAR request and could amount to a claim of unfair dismissal.
10. Be compassionate and prioritise wellbeing
Making redundancies can be a difficult time for the employer, the employee being made redundant and employees who remain within the business. Redundancy processes and being on furlough can increase anxiety and have an adverse effect on mental health. An employer has a duty of care to its employees.
Ensure managers are considerate and empathetic, recognising how employees may be feeling.
Those who remain can also suffer and feel guilt through ‘survivor syndrome’. Take time to develop the team, supporting employees and their wellbeing.
Try and make the redundancy process the best you can do. Consider providing employees with information on job seeker’s allowance (JSA) and benefits. Consider outplacement support such as external professional consultancy support or less costly online provision, in-house group work, supporting with writing CVs and seeking employment.
While your business may be struggling and need to make redundancies, other companies locally could be struggling to recruit. Liaise with local companies who are recruiting – your redundant employees may have transferrable skills of benefit. It will save the other company time and money to recruit, enable your redundant employee to get a job more quickly and make what can often be a difficult experience, an improved one for all.
The end of furlough may present new opportunities for businesses to consider what to do going forward with their business operation, working hours and offering greater flexibility. It may provide chances for employees who have enjoyed reduced hours on furlough to want to make a request to continue on reduced hours, accepting reduced pay. For other employers, the end of furlough may inevitably mean having to make redundancies, recognising the cost implications and having considered all the alternatives.
Whatever outcome a business may face at the end of furlough, communication with employees is of critical importance. Respect the concerns, fears and anxieties of those who may be returning to work after a long period of absence, support those who are made redundant and be mindful of those who ‘survived’ redundancy and the guilt of how they may be feeling. Stand in the shoes of all those affected – how would you want to be treated?
Written by Jill Bottomley, FCIPD – Director HR Dept
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