1st June, 2020
Redundancies during the COVID-19 pandemic
As a result of COVID-19, the Government introduced the Coronavirus Job Retention Scheme (“CJRS”).
We won’t cover the CJRS in detail in this article but further details can be found by clicking here.
The CJRS is a temporary measure to assist employers to continue paying all or part of their employee’s wages, with a view to avoiding redundancies or laying off the employee whose operations have been severely affected by COVID-19.
Can employers make employees redundant whilst the CJRS remains in place, which is currently until the end of October 2020?
As the CJRS is only a temporary measure, some redundancies may become inevitable, particularly once the scheme comes to an end.
The Government has published guidance for employers and guidance for employees regarding the CJRS. It has also published a Treasury Direction, albeit this does not mention redundancies.
The guidance for employers provides that employees still have the same rights at work whilst they are on furlough, including redundancy payments. It continues to state that grants cannot be used to substitute redundancy payments.
The guidance for employees provides that an employee can still make an employee redundant whilst they are on furlough or afterwards; and that an individual’s rights as an employee are not affected by being on furlough, including redundancy rights.
This allows us to conclude that employees can be made redundant whilst they are on furlough, but the employer cannot claim any statutory redundancy payments under the CJRS.
How should employers carry out a redundancy process whilst an employee is on furlough?
- Employee’s existing employment rights are not affected whilst on furlough meaning that the employer must establish that there is a genuine redundancy situation and that employers will still need to follow a fair process, in order to avoid claims for unfair dismissal. This will involve warning and consulting employees, or their representative(s), about the proposed redundancy; selecting a fair basis on which to select for redundancy, i.e. selecting an appropriate pool and selection criteria; and considering alternative employment.
- The selection pool must not be discriminatory, either directly or indirectly to avoid a breach of the Equality Act 2010. Employers should not automatically select an employee for redundancy purely on the basis that they are on furlough. For example, if an employee has been placed on furlough because they are shielding for a health reason, then selecting this employee for redundancy may be indirect discrimination based on
- Redundancy consultation meetings (whether individual and/or collective) will still need to take place but these will likely need to be conducted remotely, i.e. via video call or telephone call where this is not possible. Further, as explained in our article ‘Can employers still conduct disciplinary and grievance procedures during the COVID-19 pandemic?’, employers should consider whether all individuals have access to the technology required or if anyone has a disability which may affect their ability to use video technology.
- Although there is no statutory right to be accompanied at redundancy meetings, it is good practice for employers to allow employees to be accompanied at redundancy meetings, as this may indicate an intention to act fairly. As such, arrangements should be made for employees to be ‘accompanied’, i.e. allowing them to join the video call. Employees and staff representatives will still be allowed to accompany colleagues even if they are also on furlough. The guidance for employees confirms that “whilst on furlough, you may still undertake union or non-union representative’s duties and activities for the purpose of an individual or collective representation of employees or other workers.”
- If an employer is considering terminating an employee’s employment by reason of redundancy whilst the CJRS is operational, the question of whether a genuine redundancy situation exists may not be straightforward and employers may need to justify why they are doing this rather than keeping the employee on furlough until the CJRS ends. There may be a risk that the dismissal is unfair if the employee could have been kept on furlough for longer, at minimal or no cost to the employer, which would ultimately be more beneficial for the employee in the short term.
As above, employees’ employment rights are not affected by the CJRS. This means that employees with at least two years’ continuous employment at the date of dismissal are entitled to a redundancy payment if they are dismissed by reason of redundancy. They may also have a contractual right to an enhanced contractual redundancy payment. Employees will also be entitled to their contractual notice pay (or payment in lieu) and any outstanding but unused holiday entitlement (or payment in lieu).
Employers cannot claim the cost of any statutory or contractual redundancy payment under the CJRS.
The Government guidance is silent on notice payments. It seems likely that notice pay should be paid at the employee’s full rate of pay, meaning that the employer would need to “top up” the furlough pay for the duration of the employee’s notice period.
Further, employers will not be able to reclaim the cost for any outstanding but unused holiday that is paid in lieu. However, they will be able to claim the cost of any annual leave taken during the employee’s notice period (up to the cap under the CJRS).
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