Approaching redundancies as the furlough scheme comes to an end

June 19, 2020

Despite the job retention bonus that was announced in the summer statement, many businesses will still find themselves considering redundancy as an option as the furlough scheme inevitably comes to an end. Employment partners Shilpen Savani and Paul Ryman have provided answers to some FAQs surrounding Coronavirus and redundancy.

Have there been any special allowances for restructuring made because of the coronavirus outbreak?

No, the government’s rescue measures have not changed the underlying employment laws. So restructuring should be implemented with proper consultation and ensuring redundancy selections are made fairly and in compliance with equality laws.

Can I keep employees furloughed after the job retention scheme ends, or do I have to bring them back or make them redundant?

You can continue a furlough arrangement with your employees after the scheme ends, but this must be with the express agreement of the employees and the employer will have to pay their salaries in full. It is difficult to see this being an attractive option and the reality is that employees will have to come back or be dismissed for redundancy when the scheme closes. You may be able to agree ‘short time working’ or ‘lay off’ arrangements with staff, but this would need to be done with their express agreement, having followed the appropriate employment law process.

Am I allowed to make redundancies in the business while I am making use of the furlough scheme?

Yes, just be sure to consult with the affected employees so that the redundancies are made in a fair and lawful way.

What does a consultation process look like with a furloughed workforce?

The starting point is to consider the type of work which is no longer needed and to identify those employees performing that work. There is no mandatory statutory procedure for fairly dismissing an employee for redundancy, but employers must follow a fair consultation procedure and make dismissal decisions that are fair and reasonable in the circumstances. Where more than 20 redundancy dismissals are being considered within a 90-day window this will require compliance with statutory collective consultation requirements too.

How does remote working affect the way consultations should be run?

Remote working should not prevent meaningful consultation and employers are increasingly using video platforms and telephone calls for this.

What alternatives to redundancies do I need to be considering?

A dismissal will probably be unfair unless the employer explores whether suitable alternative employment exists within its organisation. This means you must consider whether there are job openings available internally to avoid a redundancy dismissal. You should also investigate whether it is possible to avoid or reduce the need for dismissals altogether, usually in consultation with the affected employees. Possible options may include arrangements like reducing hours or job shares.

Do I need to prioritise redundancies among furloughed staff?

Not at all, the selection pool should be decided independently and without regard to which staff have been furloughed. It may be tempting to focus on those who are already on furlough, but this raises the question of whether the selection process for furlough was rigorous enough. The better way is to identify those who perform the same or similar work and base the selection pool on this.

When can I start making furloughed staff redundant if I don’t think the business will be able to take them back?

Anytime. You can choose to wait until the end of the job retention scheme if appropriate, but where redundancies are inevitable this can be implemented during furlough. You are under a duty to raise the possibility of redundancies as soon as reasonably possible, so even if you are not going to actually start the redundancy process now, you should be having a dialogue with staff to keep them informed of the situation.

What notice pay is a furloughed employee entitled to, and can I use the furlough scheme to pay their notice period?

A furloughed employee’s notice pay would be based on their entitlement under their contract of employment, and the statutory right to receive minimum notice pay. If an employee’s contractual notice period is the same (or up to 6 days in excess) of the statutory minimum, they must be paid 100% pay during their notice period on furlough. If their contractual notice period is 1 week or more in excess of the statutory minimum, they can be paid at any agreed reduced rate of pay during their notice on furlough. You can use the furlough scheme during the notice period, but if an employee is paid in lieu of notice this probably cannot be claimed under the scheme.

How does furlough affect redundancy pay?

The furlough scheme doesn’t affect an employee’s right to receive statutory redundancy pay. But bear in mind this is the employer’s responsibility and can’t be recovered under the furlough scheme.

Can I renegotiate furloughed worker’s contracts before taking them back?

Yes, you are free to renegotiate and vary your furloughed workers’ contracts, but ensure this is done by agreement (and following consultation if appropriate) and properly confirmed in writing to avoid the risk of constructive unfair dismissal and breach of contract claims.