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The coronavirus (COVID-19) pandemic has posed a significant threat to people’s health and caused huge disruption to businesses. Employers have been forced to adapt their practices and procedures to ensure their business continuity by furloughing their staff.
However, with employers needing to contribute toward their employees furlough costs from 1st September and the scheme due to end on 31st October organisations are now looking to the future. For many redundancy is likely to be a consideration; either whilst staff are on furlough or when the furlough scheme ends on 31 October 2020.
The Government have confirmed that employers can still make furloughed employees redundant but have urged employers to avoid making redundancies if they can.
However, where redundancies are necessary, following good principles of redundancy management will help protect businesses against tribunal claims as well as reduce the stress for departing employees and the potentially negative impact on redundancy survivors’ morale.
These include ensuring that a proper consultation exercise is carried out as early as practicable, and that fair and consistent selection criteria are applied.
Compassion during a redundancy situation
Fears about job security and income loss have risen particularly over the last few months and for many individuals their mental health is already at a low ebb. It is important that employers approach a redundancy process with compassion and treat everyone with dignity, respect and kindness.
Regular, honest and communication throughout the redundancy process is important to avoid misunderstandings. Take time to explain the reasons for the redundancy and why it’s a hard business decision, and make sure staff are aware of the actions that were taken to avoid redundancy. Make sure everyone knows their contribution to the business was valued and that redundancy selection is in no way a reflection on them personally.
Be prepared to deal with feedback and concerns, and ensure that the information given out is clear, and understood by those concerned.
Redundancy selection process and criteria
A key consideration in any redundancy process will be how staff are selected for redundancy and the ‘pools’ of staff involved. To be fair, the selection criteria must be fair and objective and avoid any direct or indirect discrimination in any way.
In the case of a redundancy process involving furloughed employees, simply selecting employees for redundancy on the basis that they have been furloughed could be fraught with problems where for instance:
- Staff who were put on furlough because they had caring responsibilities or shielding for health reasons, simply pooling could mean that selecting these employees for redundancy could constitute indirect discrimination based on sex, disability or age or
- Selecting someone for redundancy when they could remain on furlough could result in the ensuing dismissal being unfair.
When you have completed your redundancy selection you will then need to hold at least one consultation meeting with your employees.
Consultation is when you talk with employees either as a group or individually, and explain your planned changes, who could be affected this can include employees who are not actually losing their jobs. The usual obligation to consult staff both individually and collectively about any redundancy proposals and allow them to comment on these before they are finalised continue to apply irrespective of whether staff are furloughed or not.
Redundancy consultation meetings will still need to take place individually and/or collectively, as appropriate, but these may have to be arranged and carried out remotely; for example, via video call or conference call or in writing.
When you have reached your final decision you will need to write to your employees informing them of their dismissal by reason of redundancy and provide them with a written details of notice, redundancy payments (where staff have more than 2 yrs. service) and terms and accrued holidays and allow them the right of appeal against your decision.
Employees who are made redundant whilst on furlough are entitled to notice of termination in accordance with their contracts.
The Government have confirmed that statutory notice pay during the notice period is payable at the rate of the employee’s full contractual normal salary not their wages under the furlough scheme.
However the new rules permit employers to pay a lower rate of pay for contractual notice periods, as long as these notice periods are at least one week longer than the statutory minimum period.
Employees with two years’ continuous service are entitled to statutory redundancy payments based on a multiplier of
- half a week’s pay for each year of employment up to age of 22;
- one week’s pay for each year between the ages of 22 and 40;
- one and a half week’s pay for each year over the age of 41.
There is a maximum of 20 years’ service which can be taken into account and a statutory maximum limit on the week’s pay (currently £538 per week). For those made redundant on or after 6 April 2020 the maximum statutory redundancy pay is £16,140. Some employers may offer more generous contractual redundancy payments.
Statutory redundancy payments must be calculated based on an employee’s pre-furlough salary. This was confirmed by legislation which came into force on 31 July 2020. The legislation does not apply to employers who had already made redundancy or notice payments before 31 July.
If an employees’ pay varies, or they have no normal working hours, then pay is normally averaged over the previous 12 weeks. If this period includes at least one week of furlough then the averaging must be based on full rather than reduced pay.
Furloughed employees who are made redundant are entitled to be paid in lieu for any accrued but untaken leave (bearing in mind that annual leave continues to accrue during furlough leave).
Employers will not be able to reclaim payments in lieu of annual leave under the furlough scheme. Employers can claim a furlough grant for the cost of any annual leave taken during the notice period, of up to 80% (or 70% or 60%) salary subject to the relevant monthly cap. This leave will have to be topped up by the employer to the rate of the employee’s full (pre-furlough) salary.
Even where an employee has been furloughed before being made redundant under the furlough scheme, employers cannot reclaim the cost of:
- statutory redundancy payments
- contractual redundancy payments
- payments in lieu of notice or untaken annual leave
- extra compensatory payments for termination of employment.
Employers are likely to be able to reclaim a portion of:
- the cost of notice pay for any notice period whilst on furlough; and
- the cost of any annual leave taken during the notice period
Both these items are only claimable for up to 80% (or 70% or 60%) salary subject to the relevant monthly cap.
We’re available to help you!
Making employees redundant is never easy and the current situation is making this a reality for many, maybe for the first time. In a small business your colleagues are often your friends too however the over-riding factor must be to save your business and redundancy may be the only way forward. Apart from the overall unpleasantness of making people redundant, it is a legal minefield for employers.
If you’re not confident in approaching and managing redundancies with our extensive experience of coping with redundancies, we can support you through the whole process from preparing your initial redundancy announcements, helping you through the consultation meetings, to the issuing the dreaded dismissal notices. We will help you to get the tone of your documentation just right be it for a long-standing friend or simply a colleague who has supported the Company for many years.
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DISCLAIMER: The materials in this guidance are provided for general information purposes and do not constitute legal or other professional advice. While the information is considered to be true and correct at the date of publication, changes in circumstances may impact the accuracy and validity of the information. Turnstone HR cannot be responsible for any errors or omissions, or for any action or decision taken as a result of using the guidance. You should consult with us first for advice where appropriate