The ongoing impact of the pandemic may, unfortunately, leave some business owners considering whether they need to make redundancies to safeguard the overall viability of their business going forwards. Furthermore, as the Coronavirus Job Retention Scheme (CJRS) starts to wind down slowly, businesses are now beginning to think about what their workforce will look like when the government subsidiary ends.
Employers who need to make redundancies will be faced with additional complications of remote consultation and staff being on furlough. We set out below our answers to some key questions employers might have when thinking about redundancies in these unusual times.
Are there other options that employers should consider first?
It is sometimes better to retain employees during a temporary downturn in business than to make redundancies and face losing valuable business experience and knowledge, as well as important client connections. A redundancy process can also have a significant impact on the morale of the workforce as a whole and lead to recruitment costs later down the line when the business starts to pick up again.
Given the current situation, employees may well be open to exploring different options which would enable them to remain employed until the situation improves. Some employees may have children at home or caring responsibilities and so be open to working reduced hours or unpaid leave (for example, parental leave or a sabbatical). Another possibility may be to ask employees to take pay cuts or to defer some or all of their pay to help with short term cash flow issues.
Can employers make employees on furlough redundant?
Yes, the CJRS guidance for employees confirms that an employee can be made redundant while on furlough, or their return. However, where the business is continuing there is a potential for dismissal for redundancy to be unfair if furloughing continues to be a viable alternative.
That said, employers will need to start contributing to the costs from 1 August 2020 and so furloughing employees beyond that date will then, therefore, come at a cost to employers.
Employers should document that they have considered furloughing as an alternative to redundancy and their reasons why it would not be suitable in the particular circumstances.
Can employers carry out redundancy consultation during furlough?
While the CRJS guidance does not explicitly state whether collective or redundancy consultation can be carried out during furlough, it is most likely permissible as it is not providing services or making money for the employer. The guidance also confirms that employee representatives may undertake consultation duties or activities and that this will not be considered work.
Businesses may wish to use the time employees spend on furlough leave to absorb part of the cost of the consultation period, particularly if they are required to consult for 30 or 45 days before any dismissals take effect under the collective dismissal legislation. The consultation process may also serve as an opportunity to explore other options (such as reduced pay), allowing employers to act quickly if an agreement cannot be reached with employees.
How should employers undertake consultation remotely?
Due to coronavirus, employees may be on furlough, working from home, self-isolating or practising social distancing; this can make consultation a particular challenge.
Businesses should also be prepared for delays to normal redundancy timetables which may occur as a result.
The consultation process will differ depending on the number of employees involved and whether or not the employer needs to carry out collective consultation and elect employee representatives. Collective consultation is triggered when 20 or more redundancies are anticipated; if fewer than 20 redundancies are anticipated only individual consultation is required. We recommend businesses take advice on the process that should be followed in their particular circumstances.
Employers should take care to do everything reasonably practicable to meaningfully consult with employees, even when faced with coronavirus related challenges.
Carrying out information and consultation obligations remotely is likely to be acceptable (and is supported by previous case law), particularly in the current circumstances. Alternatively, it may be possible to carry out consultation in person with appropriate measures in place such as PPE and social distancing.
Employers should carry out a risk assessment in consideration of the latest government guidance.
More generally, businesses should think carefully about how best to handle communication to all employees (not just those at risk of redundancy) at a time when employees will be dispersed and may be anxious. One option would be to hold virtual staff meetings to ensure staff are appropriately informed about proposed measures and at the same time.
What issues should employers be aware of when carrying out remote individual consultation?
Employers should establish at the outset how they can communicate with their employees effectively and check they have all the relevant contact details (e.g. home telephone and personal email). Thought should be given to how the employee will receive the appropriate paperwork and whether they have access to a computer with a webcam or a smartphone.
Consultation can be carried out over the phone, but it may be difficult to gauge how the employee is reacting to the conversation.
While there is no statutory right for an employee to be accompanied at redundancy consultation meetings by a colleague or trade union representative, it is common practice to allow this. Employers may also wish to let a friend or family member to accompany the employee in the current circumstances, particularly as it might be difficult practically to ensure the employee is alone in the room. Employers may want to remind the employee that they do not have a legal right to record the meeting - and that would be regarded as misconduct - if they have concerns. (However, employers should keep in mind that this may be a reasonable adjustment in certain circumstances.)
What issues should employers be aware of when collectively consulting with the workforce?
Employers should think about how to ensure elections for employee representatives are fair. For example, it may be preferable to nominate an independent person to run the ballot. Larger or complex redundancies may benefit from third-party voting service to ensure voting is secret and accurate.
Employers should seek to agree to appropriate protocols with employee representatives for running virtual meetings. This should include the provision of information in advance, the security of information (including ensuring only relevant parties are permitted in online meeting rooms) and how to manage to break out conversations.
Can employees be given their notice during furlough leave, and can this be claimed under the CJRS?
Whilst the guidance does not explicitly say so; we see no reason that employees cannot be given notice while on furlough. It may, therefore, be financially preferably to keep employees on furlough for their notice period so at least part of the notice pay can be recovered under the CJRS (employers may need to 'top up' to usual pay - see below). There does not, however, appear to be any mechanism for employers who dismiss and pay in lieu of notice to reclaim this payment through the CJRS.
Where employees are to 'work out' their notice when they are on furlough, the amount they should be paid during the notice period is very complicated.
Employees who are only entitled to statutory notice from their employer (or less than one week more than statutory notice) will qualify for a minimum guaranteed notice rights if they are (a) incapable of working due to sickness or illness, or (b) 'ready and willing to work'. The first criterion is straightforward, although employees who are shielding or living with someone who is shielding or unwell are unlikely to satisfy it. The second criterion is more complicated and will likely depend on the reason for furlough and whether the employee has requested it and their reasons. Where an employee has been furloughed by the employer because there is insufficient work available, then the employee is likely to be 'ready and willing' to work and so qualify for the minimum guaranteed notice rights.
For employees who qualify for minimum guaranteed notice rights, notice pay is based on them receiving a statutory 'week's pay' according to the provisions in the ERA 1996.
The calculation of this depends on whether the employee has normal working hours and whether remuneration varies with the amount of work done. Employees who work normal working hours and receive fixed pay will be entitled to their 'norma' week's pay for each week of their notice period. There is an argument that 'normal' pay should be based on the employee's normal pre-furlough wage. For employees who have normal working hours but whose pay varies according to the times they work (e.g. because they work shift patterns), a week's pay is calculated by averaging pay for the previous 12 'working' weeks before the notice was given. As no work at all is done during furlough, this calculation should be based on pre-furlough weeks.
For employees who do not have normal working hours, a statutory week's pay is based on all remuneration over the previous 12 weeks before notice was given. This is not limited to 'working' weeks but excludes unpaid weeks. It seems, therefore, that weeks on furlough pay can be taken into account. However, there could be an argument that furlough pay does not reflect 'normal remuneration' and should therefore not be taken into account as it will artificially lower the level of a week's pay.
For employees who do not qualify for minimum guaranteed notice rights (e.g. they have a contractual notice period at least a week more than the statutory minimum), the terms of the employee's contract of employment would need to be considered
Notwithstanding the above, a business should think carefully about paying notice at furlough rate, even if they can technically do so. This will particularly be the case if the employment contract contains any post-termination restrictions that the employer will want to enforce after the end of employment. An employer will not be able to rely on these restrictions if it has dismissed the employee in breach of contract by underpaying notice pay. It is also entirely possible that Employment Tribunals may go out of their way to utilise one of several legal arguments to ensure that employees are paid notice at 100% of salary and so not disadvantaged by agreeing to furlough. If in doubt, we suggest businesses seek legal advice on this point.
How is statutory redundancy pay calculated for employees on furlough?
Statutory redundancy payments are calculated based on years of service, age and a statutory week's pay (currently capped at £538). Many employees will earn more than a statutory week's pay, even during furlough, however, where this is not the case, it seems likely that a week's pay should be based on the rate of a normal week's pay (e.g. their rate of pay before furlough).
Employers cannot reclaim reimbursement of redundancy payments under the CJRS.
For further information about redundancy or furlough leave, please contact Hollie Whyman on 020 7766 5260 or another member of our Employment team.
Businesses may also find the ACAS guidance on managing staff redundancies helpful: https://www.acas.org.uk/manage-staff-redundancies
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.