(This is the summary of a Blume Webinar delivered by Ann Marie in November 2020)
As we are all only too aware, the coronavirus pandemic poses a huge threat to people's health and wellbeing, as well as causing disruption to organisations. Unfortunately, part of an employer’s response to this ongoing threat may have to include redundancies or other cost-cutting measures like salary cuts or unpaid leave, and redundancies are what we are going to focus on today.
Furlough: the history of the scheme
I'm going to start with a recap of where we are in terms of the UK’s response to coronavirus because the situation is constantly changing, often at the last minute:
- Back in March: when hardly anyone had heard of furlough and we all stood outside on a Thursday evening to clap for the NHS - the Government announced the Coronavirus Job Retention Scheme - or CJRS - to help businesses deal with the economic consequences of the coronavirus pandemic and consequent lockdown measures. The Scheme aims to help employers whose operations have been severely affected by coronavirus and is in place until the end of March 2021.
- The Scheme allows organisations to 'furlough' employees, ie place them on a temporary leave of absence. Under the first phase of the scheme (that concluded at the end of June), employers could reclaim up to 80% of furloughed staff wage costs, subject to a cap. Furloughed staff could not carry out any work for the employer.
- A further flexible phase of the scheme was operational between 1 July and 31 October, which gave employers an alternative to full furlough, whereby their employees could work part time and remain furloughed for the rest of the time.
Furlough: where we are now
- As a result of the second lockdown in England taking place from 5 November to 2 December, the furlough scheme has been extended until the end of March 2021. This extended scheme will support salaries at 80% of wage costs up to a maximum of £2,500 per month. The flexible furlough option remains in play. And that is really where we are now. This essentially takes the CJRS back to the level it was at in August before greater employer contributions were required in September and October.
- Employers can claim under the extended furlough scheme even if they have never used the CJRS before or have not furloughed a particular employee before, provided the employee was on their payroll on 30 October 2020. All employees can be furloughed regardless of whether they are on full-time, part-time, agency, flexible or zero-hour contracts.
- The Job Support Scheme that was due to start on 1 November, has been postponed and the £1,000 job retention bonus will not now happen. Rishi Sunak has said that another retention incentive “will be deployed at an appropriate time”. This is a change which has rather gone under the radar but could have a significant impact on cash-strapped organisations that have included payment of the job retention bonus in their forward financial planning.
As the furlough scheme was coming to an end in October, there was a flurry of redundancy activity on the part of employers as the realisation dawned that the Job Support Scheme was significantly less generous than furlough and there was no end in sight to coronavirus or its impact on the economy. The CJRS has now been extended and for some employers in, say, the hospitality sector, it is a lifeline offering the chance to keep good employees linked to the business.
However, there are still costs associated with putting employees on furlough, such as employer NI, pension contributions and accrued holiday, and employers should consider if certain jobs are really viable or if they are just kicking the metaphorical can down the road.
Which brings us on to ...
Redundancy - six key considerations
- Definition of redundancy - Redundancy is a potentially fair reason for dismissal but only if it is a genuine redundancy ie on account of reduction of work of a particular type or closure of a workplace. Don’t be tempted to try to use redundancy as an easy way of getting rid of a difficult employee. Trust me, it will be obvious that that is what you are doing.
- The selection pool – Once you have decided that you will probably have to make redundancies and have prepared the business case for redundancy, the first step is to define your selection ‘pool’ of potentially affected employees. This is the group of employees from whom the people to be made redundant will be selected. This should include everyone in the workplace with the same or similar skills. Your focus here should be on retaining the workforce that best meets your future needs.
- The selection process – If more than one employee is at risk of redundancy, you will have to devise a fair selection process to identify who is going to be provisionally selected for redundancy. Most employers use a weighted matrix of selection criteria geared towards the future needs of the business for these purposes. As far as possible, there should be an objective basis for scoring e.g. based on disciplinary records, qualifications and performance appraisals. Employees should be given the chance to comment on the selection criteria and their scores.
- Redundancy consultation – Redundancy is all about meaningful consultation. Employers should expect to meet with employees on at least two occasions, to discuss with them the reasons for the redundancy proposal, their selection and any proposed alternatives. The employee should be encouraged to contribute to these discussions with any ideas they may have to avoid the redundancy. The fact that we are all being encouraged to work from home if we can brings logistical challenges to any employer planning a redundancy programme and I don’t think anyone would claim it was ideal to carry out redundancy consultations remotely by zoom or, worse, by phone. From a legal point of view, however, consulting remotely on redundancy is entirely possible provided that the employer takes particular care to ensure that the consultation is meaningful. If you are planning redundancies, I should also mention an argument that may well come up in the course of a redundancy consultation: the argument that it is unfair to make an employee redundant when the furlough scheme is available as an alternative. There is no definitive answer to this one because it depends on the circumstances that apply at the time, but I suggest that furlough should at least be considered as an alternative to redundancy even if you ultimately decide that it is not the right course of action to take.
- In terms of duration of consultation, there is no set period for consultation if you are dismissing fewer than 20 employees, but the absolute bare minimum for consultation – if there is only one person in the selection pool and there are no alternatives to redundancy to consider - is a week. If you are planning to dismiss 20 or more employees in a 90-day period at a single establishment, then you are also required to consult collectively with trade unions or employee representatives and there are prescribed periods for consultation. These consultation periods range from 30-45 days before dismissals take effect, depending on the number of employees affected.
- Alternative employment: in order for a redundancy process to be fair, you must consider if there are any alternative roles available in the organisation. All available roles should be discussed with the employee, even if they are less senior or on lower rates of pay.
So that is a whistle stop tour through the redundancy process.
There is one final point to mention before finishing. I said earlier that there was a flurry of redundancy activity in October when it was thought that furlough was ending and I should add that it is possible for you to re-employ someone whose role has recently been made redundant and put them on furlough leave. In order to be eligible for this, the employee must have been on the payroll on 23 September 2020.
To find out what further help is available please read Ann Marie's profile and those of the other Blume HR Professionals.