The Furlough-down: Making redundancies after Covid-19

With the tapering of the Government’s Coronavirus Job Retention Scheme (CJRS) now in full swing, it is crucial for businesses to keep a close eye on headcount. 

We get asked about this, and other Coronavirus Jobs Retention Scheme matters, a lot! So, we have collated a number of frequently asked questions that may be of some relevance to you and your business.

We've broken them down into five topics, simply click the links below to read each article:

1. An update on furlough and the Coronavirus Jobs Retention Scheme 
2. Flexible furlough - what is it and how to use it 
3. Exiting furlough and unfurloughing staff
4. Making redundancies in a covid world (THIS ARTICLE)
5. Changing staff terms and conditions

Making redundancies after Covid-19

With the tapering of the Government’s Coronavirus Job Retention Scheme (CJRS) now in full swing, it is crucial for businesses to keep a close eye on headcount. 

With reduced incomes or cash reserves, it is unfortunately necessary to be reviewing the businesses often greatest but most costly asset – staff.

In considering redundancies, employers should ensure that they follow the appropriate process summarised below, but also, be alive to the nuances that operating the CJRS will have thrown up.

As a start, the business should ascertain the level of work that may be forecast for the future and therefore, the categories, and number, of employees which will be affected.  If it is anticipated that in excess of 20 employees may be dismissed as a result of this process, there will be an obligation on the business to collectively consult with the appropriate, depending on the circumstances, representatives and to notify the Secretary of State.

When progressing the redundancy process, the business will require to place the appropriate “pools” of employees at risk, apply objective and quantifiable scoring criteria to determine which employees should be provisionally selected for redundancy and thereafter, individually consult with the employees, ensuring that the necessary discussion points, including the availability of suitable alternative employment, are adequately covered and the employee’s feedback sought.

Where compulsory redundancies cannot be avoided through consultation, the exiting employee(s)’ redundancy packages should be determined. These will be formed of notice (either worked or paid in lieu), accrued but untaken holiday entitlement and, for those employees with in excess of two years’ service, a statutory redundancy payment calculated as follows:

• One and a half weeks' pay for each complete year of service in which the employee was aged 41 or over at the beginning of the year;
• One week's pay for each complete year of service in which the employee was aged 22-40 at the beginning of the year; and
• Half a week's pay for each complete year of service in which the employee was under the age of 22 for any part of the year.

Where a “week’s pay” is subject to a statutory cap of £538. Employees with more than two years’ service have the statutory right to receive written confirmation of the reason their employment has ended. Accordingly, a suitable termination letter should be issued, which must also offer the right of appeal.

Thinks to consider in times like these

• Communication: Where staff are furloughed or working remotely, the method of communicating with staff at each procedural point should be reviewed. Virtual meetings are appropriate where socially distanced meetings may not be possible.
• Selection criteria: Whilst absence from work may be “scored”, the fact an employee is on furlough must not be negatively considered
• Calculating a statutory redundancy payment: When determining a week’s pay for the purposes of calculating the redundant employee’s severance payment(s), any weeks spent on furlough should be discounted in determining the employee’s average pay where the pay varies from pay period to pay period
• Holiday accrual: Many employers encouraged employees to utilise some of their accrued holidays whilst on furlough leave. However, where this was not undertaken, employees will have continued to accrue leave whilst on furlough and would be entitled to a payment in lieu of their untaken holidays.
• Notice pay/period: Employees may be retained on furlough whilst serving out their notice period. This would enable the employer to continue to benefit from the CJRS but employers should be mindful of the length of the notice periods given the proximity of the end of the CJRS which would curtail the employee’s “furlough leave”.