As the support provided by the Government’s Coronavirus Job Retention Scheme (furlough scheme) begins to wind down from 1 August 2020, many employers are considering the future of their business and the need to restructure and make redundancies.
Here we consider key points for employers to bear in mind when implementing redundancies, particularly in light of altered circumstances as a result of the COVID-19 pandemic.
- Ensure compliance with redundancy procedures
Employers must ensure that they still follow the usual procedures for redundancy during COVID-19, including the requirement for fair and lawful individual and / or collective consultations. Fair consultation involves being receptive to alternatives such as reduced working hours and pay or considering applications for voluntary redundancy or early retirement.
An employer who is looking to make 20 or more employees redundant within a period of 90 days will be under a duty to collectively consult. Such consultation must take place no later than:
- 30 days when 20 to 99 redundancies are proposed; or
- 45 days where over 100 redundancies are proposed,
before the first dismissal takes place. They must also submit an HR1 form to the secretary of state for Business Enterprise Innovation and Skills 30 days before the first redundancy takes effect.
- Take into account likely logistical difficulties
Employers should bear in mind the logistical challenges presented by COVID-19, particularly as there are no provisions in place to make the timeframe for each element of the redundancy process more flexible.
For example, the collective consultation timeframe remains the same, despite the fact that consultation process may take longer than usual in the current circumstances. Adequate planning must take place to recognise the need for additional time to ensure that the process can be undertaken meaningfully.
Whilst it is possible to defend a failure to comply with the minimum collective consultation timeframe in the event of 'special circumstances', COVID-19 alone does not excuse employers’ failure to adhere to requirements.
Other logistical challenges include communication with employees. Whilst the redundancy process can be undertaken remotely, this will require careful planning. If undertaking a remote redundancy process, employers should facilitate access to the required technology and ensure that employees involved have the appropriate equipment to participate. If your redundancy process allows for employees to have the right to be accompanied to redundancy meetings, they should still be given this right, even if the meeting is carried out remotely.
Finally, you should also factor in employees’ other responsibilities during COVID-19, including home schooling and caring for relatives.
- Who can be selected for redundancy during COVID-19?
Many employers have asked if furloughed employees can be made redundant, and the answer is yes. However, redundancy selection should be carried out using fair and objective criteria.
Such criteria could include quality or output of work, skills, attendance, disciplinary record or length of service. Employees should not be included in a pool for redundancy selection by virtue of their furloughed status alone and caution must be exercised during the employer’s selection process.
The recent case of Gwynedd Council v Barrett demonstrates that there is a level of flexibility to the selection process for suitable alternative employment. The case considered an employer’s use of an interview process rather than a selection and scoring process in considering applications for alternative employment.
The Claimants were teachers who, following a reorganisation of school services, were made redundant. Rather than using a selection/scoring process, the employer used an interview process to consider applications for alternative employment. The Claimants were effectively applying for their former jobs in a new school on the site of their former school. There was no consultation over the proposals by the employer, with no appeal against dismissal. Overall the Employment Tribunal was entitled to conclude that process was unfair.
The Employment Appeal Tribunal contrasted redundancy processes where employees were considered for alternative jobs using a 'forward looking' selection process e.g. by competitive interview for a new post and a process of consultation and selection. The Claimants were effectively asked to apply for the same or substantially the same job, rather than a new post. The exercise was not so much 'forward-looking' but closer to a selection process from within a pool. Effectively the employer's approach to alternative employment was to simply require the Claimants to apply for their own jobs, with no consultation or appeal, and it was not perverse for the Tribunal to find that unfair.
The EAT emphasised that the general principles of fairness came from the Employment Rights Act, and that guidelines from case law did not create mandatory requirements that had to apply in every case. The judgment also addressed appeals in redundancy, and elements of the case related to the particular legal frameworks in State schools.
Employers should also avoid choosing criteria that could have a detrimental effect on people of a protected characteristic. For example, a decision to include only furloughed staff in a selection pool may include staff who are shielding for health reasons and could constitute indirect discrimination based on disability or age.
- Calculating redundancy payments
Employers should bear in mind additional complexities in the calculation of redundancy payments for furloughed employees.
Furloughed employees are entitled to full salary during their notice period (depending on whether contractual or statutory), unless they are certified as too ill to work and their contractual notice pay entitlement is higher than their statutory notice entitlement. They are also entitled to statutory redundancy pay based on their normal week’s pay capped at £538 per week and annual leave paid at their full rate of pay. However, note that the employee’s full salary may have been altered by variation prior to the employee being furloughed.
There are limits on what an employer can reclaim from the Government in a redundancy situation. Assuming that payment is not made in lieu of notice and the employee’s notice period runs concurrently with a period of furlough, employers can reclaim a contribution under the Coronavirus Job Retention Scheme (CJRS) from HMRC to the tune of 80% of the employees normal salary or £2,500, whichever the lower, until 1 August, when the contribution will not include employer’s NICs and pension contributions, which have to be paid by employers. In September this contribution will go down to 70% and then from 1 October – 60%. They will not be entitled to reclaim the cost of statutory redundancy payments, contractual redundancy payments, payments in lieu of notice or untaken annual leave and extra compensatory payments for termination of employment.
The redundancy pay calculator can help employers in working out the sums due to employees: https://www.gov.uk/calculate-your-redundancy-pay