Redundancies during furlough

Posted on 27th April 2020

Are you considering how your businesses will survive post Covid-19 and if you will be able to continue to employ the same number of staff as before the crisis? Redundancies should always be considered as a last resort, but should you wish to start the selection process, we have put together some guidance for you to assist you in making redundancies during furlough.

Can I make redundancies during furlough?

Employers are able to make redundancies during furlough but as the CJRS grant is protecting 80% of their salaries until 30th June, we advise that you wait until the scheme ends to make any redundancy decisions.

My business is in financial hardship and I know I will not be able to bring all of my furloughed staff back to work. What do I do?

We advise that you start consultations with your employees at the soonest possible time and not less than 2 weeks before the 31st June 2020 end date. If you are making less than 20 redundancies, there are no set rules regarding the length of time consultations need to go on for however you do need to allow a reasonable amount of time.

If your employees know that they are risk of redundancy, they will be able to look for future work.

Compulsory redundancies should be avoided wherever possible and alternatives be considered such as asking for volunteers, offering short time working, offering alternative employment or asking the employee to stop working for a short time.

How do I select which employees to make redundant?

The group from which employees may be selected for redundancy (the selection pool) must be carefully identified. It will usually be at least one of:

  •  those who undertake a similar type of work
  • those who work in a particular department
  • those who work at a relevant location
  • those whose work has ceased or been reduced, or is expected to do so

In many redundancy situations, the employer may identify a range of selection pools. If an employer makes redundancies without considering a selection pool correctly, the dismissals may be legally unfair.

After the consultation is complete, the employer may need to choose individuals from within the selection pool.  It is common to use a point scoring system based on the following criteria:

  • Skills needed to take the business forward
  • Performance
  • Flexibility
  • Disciplinary record
  • Sickness record (discounting any periods of absence for disability- or pregnancy-related reasons)
  • Length of service

You must never select employees based on any of the protected characteristics as you may be accused of discrimination and taken to an employment tribunal.

How do I make sure the process is fair?

As long as employers have used a robust way of selecting employees for redundancy, you have held meaningful consultations, acknowledged employees ideas for alternatives to redundancy, considered alternatives to redundancy and offered alternative employment, if possible, then employers will be able to evidence that they have taken all reasonable steps you need to when making redundancies.

I want to ask for volunteers, do I need to ask my whole workforce?

If the employer wishes to ask employees to volunteer for redundancy, they are required to put the offer to the entire workforce, and it must be the employee’s decision to volunteer. Make sure that no one is pressured into volunteering.

Employers do not have to select those employees who have volunteered, for example if they have a highly skilled employee who has a vital role within the business, they can explain that they are not selecting them. Employers should make it clear that if they volunteer it doesn’t automatically mean they will be selected.

Do I still need to write to the employees at risk if they have signed a furlough agreement?

Employers should write to the employees who are selected ‘at risk’ of redundancy, even though they have signed a furlough agreement which advises them that they were at risk prior to the furlough period.

My employee has less than 2 years’ service, do I still need to consult?

Meaningful consultations should be held with all employees who are at risk, irrespective of length of service.

Consultations are conversations that you have with the employees who are at risk. No decision is made until the final consultation. It is a chance for employers to let employees know of the proposed changes and gain the employees feedback.

During furlough, consultations will need to be done remotely such as video call or by telephone. There is no legal requirement to consult face to face.

What do I need to discuss during consultations?

During the consultation process, you must let the employees know, in writing, the following information:

  • why you need to make redundancies
  • the number of employees and which jobs are at risk
  • how you will select employees for redundancy
  • how you plan to carry out the redundancies, including time frames
  • how you will calculate redundancy pay

When should I begin consultations for more than 20 employees?

If there are to be 20-99 redundancies, you must start consultations 30 days before the first redundancy.

If there are over 100 redundancies, you must start consultations 45 days before the first redundancy.

As mentioned before, if you are making less than 20 redundancies, there are no set rules for when consultations should be started but we recommend not less than 2 weeks before the first redundancy in order to allow for meaningful consultation.

There is also no maximum time frame for holding consultations so if the employer knows that redundancies cannot be avoided, the process should begin as soon as possible. This doesn’t mean that redundancies will take place, it purely means that they are being considered and feedback from employees is welcome.

Can my employees appeal my decision to make them redundant?

Employers should put in place an appeal process for employees who wish to appeal the redundancy decision. This process should be explained in the final decision letter that you issue after the final consultation.

When should I end consultations and make my decision?

As we mentioned previously, we do not advise employers to make any final decisions, in regards to making employees redundant, until after 30th June 2020 when the government funding is due to end.

There may be new business opportunities that come to light before the end of the furlough period and employers may realise that they require employees to come back to work after all.

What notice do I have to pay?

The amount of notice paid to employees who are made redundant depends on many factors such as length of service, contractual notice period, statutory redundancy payments and any holiday that has been accrued, but not taken, up until the final day of employment.

Should you need further advice on notice pay, one of out dedicated consultants at Gateway HR will be able to advise you further.

Can I use the government funding to substitute redundancy pay?

Absolutely not. The government have made it very clear that the CJRS grant cannot be used to substitute statutory redundancy pay.

Any redundancy pay,  notice pay and holiday accrual must be paid by the employer.

What about employees who have under 2 years’ service?

As of the day of this guidance being written, there is no definitive word from HMRC regarding giving people notice before the end of the furlough period and using the grant to help substitute notice pay.

We believe it goes against the spirit of the scheme though, which was put in place to help protect jobs, so we strongly advise against using the grant for this reason.

Should employers decide to go ahead and use the grant to substitute notice pay, it would need to be paid at 100% of contractual salary and any holiday pay due.

If HMRC deem the use of the funding to be unacceptable, employers may be required to pay it back along with any fine HMRC issue.

I am still unclear about the process, can you help?

Our dedicated HR Consultants here at Gateway HR are here to give you any further advice or help guide you through the process.

Carla Cifaldi Character
Written by:
Carla Cifaldi
HR Consultant