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Guest Post: Legal must-knows for employers before they make redundancies

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Guest Post: Legal must-knows for employers before they make redundancies

Kemp Little’s employment specialist James Champness explains details of the government’s furlough scheme as it starts to wind down.

The government’s Coronavirus Job Retention Scheme (CJRS) is starting to wind down, with the support available to employers reducing on a phased basis towards the end of October 2020, when the scheme is due to come to an end.

Chancellor Rishi Sunak announced the CJRS in March 2020, and the scheme has been received positively as a way for employers to retain staff in employment, even if the immediate requirement for those staff had diminished or vanished as a result of the Covid-19 pandemic.

The CJRS allows employers to place staff on paid leave (furlough), and pay them (currently) 80% of their usual wage, capped at £2,500 a month, which can be claimed back from the government.

Over the coming months, employers will have to contribute increasing amounts towards the wage costs of furloughed employees.

As a counter-measure, Sunak has also announced a “job retention bonus”, so that if an employer brings someone back to work who was furloughed and continues to employ them between November and January, the government will pay the company a £1,000 bonus per worker.

Redundancies

The intent of the CJRS (and of job retention bonuses) is to encourage employers to retain their workforce as far as possible without the need to make redundancies. For some businesses, however, this simply may not be possible, as even the costs of the tapered exit from the CJRS may be prohibitive if cashflow into the business has been shut down. If this is the case, and an employer is compelled to make redundancies rather than retain employees under the furlough scheme, it’s worth being aware that employers are able to use the CJRS to claim wage costs in respect of employees who are in their notice period.

However, this is not the case for any redundancy payments (statutory or contractual); these fall to the employer to bear. The government has also clarified that any redundancy payments must also be calculated based upon an employee’s normal contractual salary, rather than the temporarily reduced salary during furlough.

Where an employer is proposing to make 20 or more redundancies, they should also be mindful of their obligation to carry out collective consultation with elected employee representatives. An employer looking to carry out a consultation exercise during the period covered by the CJRS would need to start the exercise no later than October 1, 2020, if proposing 20-99 redundancies, or by September 16, 2020, if proposing 100 or more redundancies. This would allow for the minimum consultation period to take place while the CJRS was still in operation, but would not take into account any required notice periods.

An employer looking to get the maximum benefit available under CJRS should start the process as soon as possible, in order to allow for the possibility of some, or all, of employees’ notice periods also falling within the CJRS period.

Will it be an unfair dismissal if an employer makes someone redundant rather than keeping them on furlough?

Employees placed at risk of redundancy may argue they should be kept on their existing furlough arrangements, and that it would be unfair to dismiss them while the scheme is still in place. To some extent, the answer to this will depend on the particular circumstances of the case, including the size and resources of the employer.

However, the fact that employers are now required to contribute towards furloughed employees’ furlough pay (a contribution which increases each month to October) may be a relevant factor that would allow employers to make furloughed employees redundant before the end of the scheme.

Where a genuine redundancy situation exists, the option to furlough employees will not necessarily mean that an employee’s dismissal will be unfair. Where jobs have been genuinely eliminated and workplaces closed, the fact that there may be a possibility that an employer may need employees in similar roles sometime in the future does not mean an employer must continue to furlough employees. However, employers should at least consider furloughing as an alternative to redundancy for each type of role they consider redundant, and document the reasons why it would not be suitable in the particular circumstances of the case.

Flexible furlough

Another alternative to redundancies might be the (relatively new) concept of flexible furloughing. At the start of the CJRS, the position was clear – if an employee was furloughed, they were not permitted to do any work for their employer. But since July 1, 2020, employers have now been able to bring back furloughed staff on a flexible basis, including part-time. For example, an employer may have enough work for a furloughed employee to return to work two days a week, but not full time.

This option may be a useful “halfway house” that might allow employees to return to do some work, even if there is not currently enough demand for the usual hours they worked before furlough.

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