Dealing with redundancy during COVID-19

Although the government have put many schemes in place in order to prevent redundancy, it is understandable that in certain circumstances making employees redundant is an unfortunate step that some businesses may be forced to take and may have to start thinking about whilst on furlough.

What is redundancy?

Redundancy is when you dismiss an employee because you no longer need anyone to do their job anymore. This may be due to a number of reasons, as such:

  • Your business is changing what it does
  • Your business is doing things in a different way, e.g. using new machinery
  • Your business is changing location or closing down

The impact of coronavirus on redundancies has been considered by the government and you can get funding under the Coronavirus Job Retention Scheme to continue to pay your employees. See our blog here for more information on the furlough scheme. Once that scheme is over you may not have sufficient work or funds to keep staff on so you need to think about this now as you may need to start the process whilst staff are on furlough to ensure you meet your legal obligations.

For a redundancy to be genuine, you must demonstrate that the employee’s job will no longer exist.

Employees have certain rights and may be entitled to redundancy pay if they are made redundant. All employees under notice of redundancy have the right to:

  • Reasonable time off to look for a new job or arrange training
  • Not to be unfairly selected for redundancy

It is important to make sure you have taken steps to avoid redundancies before dismissing any staff, including trying to find suitable alternative employment within the organisation for employees being made redundant. It is likely that, whilst the Job Retention Scheme continues to exist and be available, employees may be able to argue that furlough is currently a suitable alternative and that redundancy should only occur at the end of this scheme.

Notice pay

Redundant employees are still entitled to their notice, or pay in lieu of notice where that is possible under their employment contract. Where employees are furloughed, they can remain furloughed during their notice, and will receive whatever their agreed amount was during furlough. So, if this is the reduced rate of 80%, for most employees they will be paid 80% for the length of their notice which overlaps with furlough. Of course, where notice extends past furlough they should be paid in full for that period time.

However, the law is complicated on this payment and it has been suggested that tribunals may be sympathetic with employees who pursue a claim for the difference between the 80% and full pay in tribunal. The guidance is silent on this and the legislation was not drafted in contemplation of COVID 19 – see our thoughts on notice pay and redundancy with this video here and contact our FREE helpline coronavirus@thrivelaw.co.uk if you are unsure what to pay so we can help you work through this.

Consultation

You CAN consult during furlough and this doesn’t, in our opinion, amount to “working” so would not break the furlough leave, meaning staff can be paid at the agreed furlough rate.

It is also important to be cautious of certain minimum time periods which apply depending on the scale of the redundancies going ahead.

  • If there are 100 or more redundancies, consultation must begin at least 45 days before the first dismissal takes effect.
  • For fewer than 100 redundancies, but more than 20, the minimum period is 30 days.
  • As a bare minimum, consultation must be undertaken with a view to reaching an agreement on ways and means of avoiding dismissal, reducing the number of dismissals and mitigating their consequences.

Where ‘special circumstances’ render it not possible or ‘reasonably practicable’ to consult in good time or provide the appropriate information, the employer need not fully comply with the duty, but must still take steps as reasonably practicable as possible.

The term ‘special circumstances’ has always been extremely narrowly interpreted. With the unprecedented situation which the UK are currently facing, it is unclear how much flexibility will be given to this rule. Failure to comply with this rule can result in a ‘protective award’ being made by the Tribunal of up to 90 days’ gross pay for each dismissed employee. At the moment, with the Job Retention Scheme in place, it’s arguable that the special circumstances won’t usually be applicable for employees at this time.

The key message we want to convey is to consider whether you have to make redundancies now, as you may need to start consulting soon to meet your statutory obligations. If you aren’t sure our free helpline is open here.

We hope this information has been of use in the process of considering redundancies during this difficult time! If you have been made redundant or are an employer considering redundancy of your employees, please do get in touch.

The Thrive Tribe

Anything within this article should not be taken as legal advice. Any information provided will be general advice and for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action. If you wish to obtain specific advice to your situation and your decisions, please contact us and we will thereafter be able to advise.

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