Insights
Insights 14.7.20 Author: Andreja Okamgba

COVID-19: Redundancies

Insights 14.07.2020 Author: Andreja Okamgba

One of the many consequences of the current Coronavirus (COVID-19) pandemic is that companies are considering a range of workforce measures from reducing working hours and pay, freezing recruitment and making redundancies.

No employer will find the experience of making employees redundant easy or pleasant. However, where redundancies are necessary, following the best practice of redundancy process management will help protect against potential Employment Tribunal claims as well as minimising the stress for departing employees and maintaining good morale for remaining employees.

The redundancy process has not changed, and the main principles remain those of genuine redundancy and fair process including a meaningful consultation.

Is redundancy the appropriate response?

Before dismissing employees for redundancy, consider carefully whether there are any alternatives; this may also include retaining the employees on furlough under the Coronavirus Job Retention Scheme (CJRS) instead of making them redundant. This of course gives rise to important questions such as to what extent will employers be expected to leave staff on furlough and claim the staff costs associated with doing so from the scheme, rather than making those staff redundant whilst the scheme remains operational? Would making redundancies whilst the scheme is operational make those redundancies more likely to be substantively and/or procedurally unfair, unless the employer had a particularly compelling redundancy situation?

Ultimately, using the scheme may delay the need for redundancies but in many cases, it will not prevent them. As the CJRS is slowly wound down and employers are expected to contribute increasingly more to the costs from August to October when the scheme will eventually be withdrawn, we are seeing more and more employers considering whether they are able to retain the whole workforce and a redundancy exercise might be the next necessary step to keep the business afloat. A compelling redundancy case can therefore be made in these situations despite the CJRS.

Consultation

It is vital that businesses ensure that furloughed staff are consulted as part of any redundancy exercise. An obvious issue to overcome with furloughed employees will be the logistics of organising the meetings to take place virtually, using online platforms or other forms of electronic communication when appropriate. Consultation is a fundamental aspect of a fair dismissal for redundancy, no matter how many, or how few employees are at risk of redundancy. Where a business is proposing making 20 or more employees redundant within any 90-day period, ‘collective consultation’ rules will also apply.

The fact that employees have been placed on furlough under the CJRS will not in itself excuse the employer from the duty to consult. The essence of fair consultation is a genuine attempt to seek the views of the employee on the employer’s proposals and to consider them with an open mind.

Selection pool

Construct a pool for selection based on the future needs of the business and do not penalise employees who have been furloughed. Do not use the fact that an employee has been furloughed as a reason for selecting them for redundancy. Be aware of the potential for discrimination in selecting for redundancy employees whose vulnerability to coronavirus makes it harder for them to return to work. Avoid penalising employees whose difficulties with childcare affect their attendance at work.

Notice of redundancy and notice pay

Once the consultation process is completed, notices of employment termination can be issued. In most circumstances we would recommend that during the period of notice of redundancy the employees should have their pay topped up to normal pay. There are potential complexities to this question if contractual notice to be given is longer that the relevant statutory notice and advice should be taken. We would not advise dismissing a furloughed employee with payment in lieu of notice (PILON) as the CJRS will not cover such payments, however, it is still possible to claim for an employee if they continue to be on furlough for the duration of their notice. In some cases, the employee could be asked to return to work during the notice period, but it is important to consider whether this is allowed under the furlough agreement you reached with them.

Redundancy pay

To calculate the redundancy payment due, the employee’s normal week’s pay should be used rather than their pay while on furlough. The full formula also takes into account the employee’s age and how long have they worked for the company. In addition to the redundancy pay the employee will also be entitled to payment for accrued and unused holidays. Keep in mind that holidays accrue as normal during any period of furlough and any days due should be paid at the employee’s normal salary.

What next?

If you have any questions or concerns around this issue, please get in touch with our HR Consultancy team.