Redundancy and Furlough
As the Government Job Retention Scheme begins to require increasing employer contributions, it is forcing employers to evaluate the continued sustainability of their business, potentially leading to tough decisions.
Should a business owner conclude that they are simply not in the same position that they were pre-Covid, they may decide that they are unable to keep on the same number of staff in an effort to reduce operating costs. Redundancy is not a word that is thrown around lightly by employer or employee, but it may be something you, or your employer may be affected by.
Below I’m going to take some time to address some frequently asked questions with regards to Redundancies and how they should be carried out fairly, whilst also talking about how Redundancies work specifically in the context of furlough and the Job Retention Scheme.
How to conduct the Redundancy process.
Depending on whether you are considering making more or less than 20 individuals redundant, there are slightly different rules to follow. If you are considering making large scale redundancies in your company it is advisable to get direct professional advice and assistance, but if you only need to lose a couple of staff it is more manageable.
First, a redundancy should always start by identifying a role to be made redundant, not an employee or individual. You then start a consultation process with all the employees that fill that role. While there is no statutory minimum duration for this consultation period, you must ensure that the employee is given adequate time to process all the information and participate in the ongoing conversations fully. To this end, a two-week period is usually recommended as a minimum.
This consultation is a period that is used to explain to your employee why the redundancy is being considered and to discuss with them whether there is anything that can be done to avoid it.
In the event that there are multiple employees doing the same job, but you do not need to make all the roles redundant, you will need to complete a selection matrix and present it to the employees. This is how you will objectively select which employee is most appropriate to be selected for redundancy, should that be the decision arrived upon at the conclusion of the consultation.
The last step you will want to consider is whether you have other suitable employment opportunities in your business. Should none of the above steps provide a solution, however, you will conclude the consultation by confirming to an individual that they have now been dismissed by reason of redundancy.
What Payments do you get after being made Redundant?
If you have worked for your employer for 2 years or more, you will qualify for redundancy pay. While this amount will depend on your age, it is roughly one week’s pay for each year you have worked with the company, subject to a statutory cap.
When being confirmed redundant, your employer may ask you to work your notice or may choose to pay it in lieu of the work being performed. You should also check your contract of employment for any potential gardening leave clause to see how this will affect you, particularly if it is commonplace in your industry.
Lastly, you will also receive payment for any accrued holiday that you may not have taken up to your final day of employment.
Can redundancies be made during Furlough?
Yes. While furloughed, employees keep all their usual employment rights including the right to a fair process, so all the steps listed before should be adhered to. Furthermore, as participation in redundancy consultation is unlikely to be viewed as “work”, or a function that adds financial benefit to the organization it will not go against furlough’s requirement for an employee not to work.
Can I consult with employees remotely?
You must be reasonable in your expectations for an employee to participate in the conversation, so in some cases, you might even be expected or required to consult remotely. The important thing is to ensure that employees can engage fully and are not put at any disadvantage by not being able to attend in person meetings. You may also want to consider any potential data protection issues that could arise from doing remote consultations and file sharing, however, provided it is all managed carefully you are fine to conduct your redundancy process remotely.
Can I use the Government Job Retention Scheme to help with notice payments?
You can claim on the JRS for an employee that is on furlough. This means that if you your employee begins their notice period and you keep them on furlough, you can continue to claim to help with the payments as they are not working.
How does taking a reduced salary effect my redundancy entitlement?
As of the 30th July, a new law was introduced to clarify that employees must be paid their notice payments at 100% of their regular salary, not the reduced amount they may be on in relation to furlough. Likewise, the redundancy payment itself for those staff over 2 years should not be affected.
Can I lay off employees, or put them on Short-term working, instead of redundancy?
If you have express contractual permission to do so then absolutely, otherwise you would need your employees’ consent. While there is no time limit set to lay off and short-term working durations, an employee would have a right to claim redundancy payments after 4 weeks of being laid off. Unlike furlough, an employee that is laid-off fully does not need to be paid at all, however they will continue to accrue holiday and may be subject a statutory guarantee payment.
Onwards and upwards.
Every business considering a redundancy will have their own nuanced scenarios and specific questions. I would always encourage businesses to seek professional advice in any situation where an employee dismissal is on the table, the above information provides you with the next best thing, and may go some distance to providing more clarity if you’re starting, or experiencing, a redundancy situation yourself.
As a small business owner, remember that while it can be uncomfortable, making redundancies are often absolutely necessary for the greater good of the business and its employees, and the process you need to take ensures that things are kept as objective and impersonal as possible. At Kate Underwood HR we still appreciate how difficult these conversations can be to have with long time staff members, but we would seek to assure you that we are always there to offer support, advice or take over when needed.
If you have any further questions on redundancies and/or how they relate to furlough, the JRS, and the future of your business, please feel free to get in touch directly on 02382 025160 or email [email protected].
You’ll have to make your own tea as you can’t visit us at the office at the moment, but the advice and expertise you’ll receive is just as good as always!
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