Tags – Redundancy After Furlough
The Coronavirus Job Retention Scheme, otherwise known as the furlough scheme, is due to end on September 30th 2021.
Once the scheme ends, it’s anticipated that there will be an increased number of redundancies across many sectors in the UK.
For many businesses, this has been a lifeline during the pandemic but as we get closer to its end date, employers need to consider how they will manage those employees who were placed on it.
Initially, the scheme allowed employers to retain employees, giving them hope to return to work once the economy picks back up. As lockdown restrictions ease, many have returned back to work, however those who haven’t, anxiously wait as businesses decide if they can afford them returning.
If your business is not in a position to welcome furloughed employees back, you’re probably looking at how staff requirements need to be restructured to fit with the new economic environment.
To understand how to handle redundancy after furlough in the best possible way, here are 5 key considerations HR departments need to keep in mind.
1. Consultations
In the event that a business plans on making over 20 redundancies within a 3 month period, they are required to undertake a collective consultation with all employees.
To do this, businesses will need to elect employee representatives and consult for at least 30 to 45 days, depending on how many employees will be affected.
At the end of the day, this is a huge task for any employer and it only makes sense to have a solid plan in place well in advance.
On the other hand, if there are less than 20 redundancies, employers are still obliged to consult with those affected, giving the employee a chance to respond or be considered for alternative roles.
Essentially, consultations will allow for a clear, open and smooth process and avoid any nasty surprises that could lead to unfair dismissal claims.
Note, employers will be required to inform the Redundancy Payments Service prior to consultations or potentially face a hefty fine.
2. Statutory Rights
As with any other employee, furloughed workers have the same redundancy rights. This includes protection from discrimination and unfair dismissal.
Whilst it’s not unlawful to make furloughed workers redundant, the basic redundancy criteria needs to be met: i.e. redundancy needs to be genuine and a fair process needs to be followed.
Since the scheme was first introduced in March 2020, the government has been clear as far as statutory rights are concerned: furloughed staff are entitled to redundancy pay should they have 2 years continuous employment, including any contractual redundancy entitlement. And this should be calculated using their pre-furlough salary.
3. Paying Employees
As mentioned above, those employees who have served 2 or more years service are entitled to statutory redundancy pay, regardless of if they were placed on furlough.
In addition, if employees have accrued any holidays that have not been taken, this should be paid with the redundancy.
Therefore, it may be a good idea to act now rather than later, especially because employers are liable for 100% of salaries come October 1st.
Given the potential costs involved, it’s worth considering if there are any alternatives to redundancies; particularly for those who are paid highly or served for a long time – i.e. agreeing to work reduced hours or finding alternative roles within the business.
4. Notice Periods
On December 1st 2020, rules of the furlough scheme changed. It meant thay employers were no longer able to claim furlough money if an employee was serving their notice period.
Before this, employers could claim for those serving their notice periods ahead of redundancy, which had significant savings and many were quick to make redundancies, taking advantage of this generosity.
Now, if an employee’s contractual notice period is a week more than the applicable statutory minimum notice period, it is unaffected by the Covid-19 regulations, and you may be able to pay a lower rate.
To put it simply:
- If an employee is entitled to the statutory minimum notice period, the employer is required to pay 100% of the employee’s usual pay
- If the notice period is at least more than a week of the statutory minimum notice period, the employer can pay them at the reduced rate of pay (i.e. the pay rate they received on furlough)
In essence, it is no longer an option to claim any money from the scheme towards redundancy payments, so always consider the length of notice periods when considering redundancies.
5. Discrimination Risks
While it may feel like an easy way out to make those redundant who have been placed on furlough, you must remember that standard discrimination protections still apply.
Consequently, if the reason for dismissal is not genuine, an unfair claim can be made against you: you can’t just put under-performing employees on furlough then get rid of them if there’s work available.
And so, businesses should not automatically restrict the pool to furloughed employees and instead give careful consideration to the criteria applied to their redundancy.
Sadly, in a report by the Office for National Statistics, the redundancy rate for disabled workers was higher than average. So particular care should be taken when considering making roles redundant that are occupied by disabled employees.
Final Thoughts
It’s critical all employers take into account the above considerations to avoid any reputational damage that could occur by their redundancy story.
Beyond that though, employees’ well-being should always be put first and other strategies could be tried before deciding on the redundancy. For example, putting a freeze on recruitment, delaying an increase of wages or not paying bonuses could be implemented to avoid redundancy all together. But, if redundancy is the only option, it needs to be done following the correct procedures.
If you’d like to know more, please get in touch today.
In the meantime, check our services as a HR Consultancy Huddersfield.
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