This is the fourth and final bulletin in our series highlighting some of the key issues that employers are likely to face when returning to work following lockdown. This week we focus on potential changes that it may be necessary for employers to make to the workforce as a consequence of Coronavirus.
It has become clear as this pandemic continues that some businesses are going to find it extremely difficult to return to normal trading conditions, even once lockdown is over. Despite the furlough scheme offering a much-needed lifeline to employers and employees, many businesses particularly those in the hospitality and leisure sectors, are likely to find that business will not return to normal levels for some time to come.
Of course, some businesses will be better equipped to deal with this, but others will have little option but to reluctantly consider imposing changes to their workforce in order to remain viable.
Despite best intentions, ultimately it may be necessary for employers to consider making redundancies either in the coming months or at the end of October when the Coronavirus Job Retention Scheme (CJRS) officially ends. When the scheme ends, employers will be required to take employees back on the same terms that applied before furlough, even if trading conditions have not improved.
The current government guidance confirms that employees are still able to be made redundant whilst on furlough leave. However, whilst this is theoretically possible, there are still some important issues that employers should be taking into consideration before embarking on such a process.
The guidance is also clear that an employee’s employment rights are not affected due to being on furlough leave, such as the rights relating to redundancy, unfair dismissal and discrimination. This being the case, it is still vital that employers look to follow the correct procedures and obtain advice where appropriate when making redundancies.
To understand some of the key points specifically related to Covid19, it is first important to understand what is likely to constitute a fair redundancy process.
Summary of a fair redundancy process
First of all, there needs to be a ‘redundancy situation’. This can be due to the closure of a business, the closure of a specific place of work (moving location) or a reduction in the need for employees to do particular work.
If such a redundancy situation exists, an employer needs to follow a fair process when dismissing for redundancy reasons. Although there is no specific legal procedure set out, ACAS sets out some guidelines that employers are advised to follow and in very broad terms a fair procedure will include the following:
- The employer will have consulted appropriately and meaningfully with employees (and their representatives if collectively consulting)
- If there is a reduction in work, the employer should have followed a fair selection process, both in identifying the ‘pool’ of employees at risk of redundancy, and then fairly selecting from those in the pool to be made redundant
- The employer will have considered any suitable alternative opportunities which are available or become available before the termination date
- The employer will give employees the opportunity to appeal their selection for redundancy.
Key issues to be aware of relating to Covid19/furlough leave when making redundancies
Ordinarily, upon being made redundant employees are entitled to be paid for their notice period, either as per their contract of employment or statutory notice period if higher. This can be either ‘worked’ prior to the termination date or paid in lieu following termination (or part worked/part paid).
A common question we are being asked by employers is how does notice pay work when someone is currently on furlough?
The CJRS guidance confirms that an employee can be given their notice whilst on furlough leave, but the key question is whether this is payable at their full ‘pre furlough’ salary, or at the 80% reduced furlough rate. Although this should be a clear-cut answer, the answer is surprisingly complex and will depend upon the wording of the employee’s contract of employment, the furlough agreement and possibly the reasons for the furlough. In some cases, it will be possible to argue they are entitled to 80% and for some it will be appropriate to pay 100%.
Of course, in either situation employers may wish to use the availability of the furlough scheme to recover some, if not all of the notice pay costs. As employers are going be required to contribute towards furlough costs from August onwards, the benefits of doing this will gradually reduce as the government contribution reduces.
It is also worth noting that payments in lieu of notice cannot be reclaimed under the CJRS.
Holiday and Redundancy payments
These are usually based upon an employee’s full contractual pay so will need to be factored into the overall cost when making redundancies. Redundancy payments cannot be reclaimed through the furlough scheme.
Selection for redundancy
Employers should be careful not to automatically select those who are furloughed for redundancy as this may give rise to an unfair dismissal claims or even complaints of discrimination. The risks involved in this approach may depend upon the reasons that the employee was originally furloughed.
Another common question is whether employees who are made redundant rather than being left on furlough would have a potential claim against the employer (such as unfair dismissal), even if they may have ultimately been made redundant at the end of the furlough scheme.
The guidance is not particularly helpful in this regard and although it explicitly states that redundancies can be made during the furlough period, it is quite possible that if an employee could show that it was not necessary for such a redundancy to be made at that particular time, then they may be able to make a fairly compelling argument in the Employment Tribunal that the employer has acted unfairly and against the spirit of the scheme.
A complete failure by an employer to consider leaving an employee on furlough leave, rather than making then redundant, is potentially a failure to consider suitable alternatives to the dismissal.
Of course, some situations will involve employers not being able to afford the additional employer contributions or having some other compelling reason for making redundancies at that particular time, but in many cases, it will be far from clear cut.
As has been a pattern throughout this pandemic, further information may possibly be released by the government at a later date that will help to clarify this position for both employers and employees.
Other issues to consider
While employees are furloughed, this presents practical challenges such as in what forum to conduct any consultation meetings and a little more time may be required to be factored in so that these can take place remotely.
Although employees only have the legal right to be accompanied to disciplinary and grievance hearings, it is advisable to also allow this for redundancy situations and the means for this to happen remotely should be organised. It has been confirmed in the latest CJRS guidance that accompanying a colleague to a meeting such as this will not be deemed ‘work’ and therefore does not interfere with a furloughed colleague’s eligibility for the scheme.
Alternatives to Redundancy
Whilst unfortunately redundancies may be the only option available to many as we emerge from lockdown, there are some other alternatives that employers will be keen on exploring first to see if they can remove the ‘redundancy situation’ altogether.
We have summarised some of these other alternatives below:
- Short term working and lay-offs. Generally employers will need a contractual right to be able to follow either of these options, but in the present circumstances there may be scope to agree with the employee that they should either temporarily reduce the hours they work (short term) or temporarily agree to remain off work unpaid (lay off). Although neither of these options are likely to be attractive to an employee, they may be more attractive than the alternatives (compulsory redundancy).
- Pay reduction. As above, although this is unlikely to be attractive, it may be something the employee is willing to agree to when compared with the alternatives.
- Voluntary redundancies. Employers could seek volunteers for redundancy as a means of reducing outgoings and removing the need to make compulsory redundancies.
- A freeze on recruitment, pay raises, overtime and bonuses (subject being permitted by contractual terms)
- Reorganisations and restructuring. It may be possible to adopt more flexible working patterns such as working from home on a more permanent basis and reducing overheads elsewhere in order to retain jobs.
- Reallocation of employees to areas of the business less affected by Coronavirus (if applicable)
- Last but not least, the Flexible Furlough Scheme as outlined in our bulletin released last week. Keeping employees on the furlough scheme is intended to help many businesses avoid redundancies and the introduction of the flexible scheme from 1 July 2020 will permit employers to gradually re-introduce employees back to work at a time when the work itself may also take some time to return to pre-lockdown levels.
If you or someone you know is experiencing legal issues or has a question regarding employment law, take advantage of our complimentary initial consultation via telephone or video call now by contacting us today on 0800 999 4437 or e-mailing firstname.lastname@example.org to arrange your complimentary appointment with a friendly member of our team of legal experts. Places fill up quickly so be sure to reserve your spot now.
We look forward to helping you with your legal needs.