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COVID-19 Update: Redundancy and Furlough

29 June 2020 #Redundancy

The government guidance on furlough and the Coronavirus Job Retention Scheme (CJRS) makes clear that employees can be made redundant whilst on furlough and that normal redundancy rules and rights apply to furloughed employees.  

Whilst the usual process and principles should, therefore, be applied, employers will need to consider practical issues resulting from employees being on furlough.  Does everyone involved in the process have access to virtual meetings? Do the representatives have access to those they represent? How can data protection issues with sharing contact information be resolved? Have employees provided up to date contact information for this purpose? How will employers comply with the technical requirement to send S188 information to representatives by post or hand? 

There are also some important points that can be taken from the guidance regarding redundancies in this context and we have summarised some of the key ones, with our tips for employers, below:

  • Ensure you have budgeted to pay the redundancy payments as the CJRS cannot be used to reimburse these.
  • Ensure redundancy pay calculations are based on normal full pay and not furloughed pay. Many employers have apparently already fallen foul of this requirement.
  • Make sure that furloughed staff who are involved in the process are not providing services to you, or generating revenue for, or on your behalf or any linked or associated company.  The guidance makes clear that employee or union representatives who are solely undertaking duties for the purpose of individual and collective consultation will not disrupt their furlough but employers need to be careful not to overstep the mark here.  The guidance does not expressly cover whether you can consult with individuals about their redundancy without bringing furlough to an end but we are of the view that this would seem logical, given the above.  
  • There is currently no mechanism for you to reclaim PILONs from the CJRS and so it looks like you would need to pay these.  Therefore, you should consider if you would prefer to keep employees employed during their notice periods i.e. by keeping them on furlough, requiring them to come into work or placing them on garden leave. Note that you will need to check your contract and agreements with the employees to see which options are available to you. 
  • Consider whether you wish to serve notice during the furlough period and, if so, if you need to top this up to full pay. The guidance is silent on whether notice can be served during furlough but as the guidance says that individuals can be made redundant whilst on furlough, it seems likely that it can be. Whether this has to be paid at full pay or furlough pay will depend on the amount of notice employees are contractually entitled to and, in particular, whether or not it is in excess of the statutory minimum entitlement (plus one week).   If you offer less than the statutory (plus one week) then the likelihood is that you will need to top up the payments made.
  • Make sure you have a fair selection process for redundancy and do not limit pools/redundancies to those who are furloughed. Doing so, runs the risk of unfair dismissal claims and also potentially sex and disability discrimination claims if childcare or health has impacted decisions on who to place on furlough.
  • Consider whether you will be paying enhanced redundancy sums and the use of settlement agreements. This is unlikely to be an option for many businesses who are seeking to save costs but if you are paying enhanced sums, making these conditional on a settlement agreement has the benefit of ensuring employees do not subsequently bring claims which can, of course, be costly to defend.

This is certainly a difficult area for employers, many of whom are now under immense financial and commercial pressure.  It is expected that the COVID-19 pandemic will give rise to a significant number of claims in the near future relating to employers’ handling of processes and so the decisions taken now may well have a significant impact on the finances and reputation of the business in the future.

Find out more about our redundancy services and get in touch with our expert team of employment lawyers today, we’re on hand to help with anything you need.

Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking professional and legal advice. Please refer to the full General Notices on our website.

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Louise Keenan

Louise Keenan
Associate

E: LKeenan@clarkslegal.com
T: 020 7539 8082
M: 0779 900 7325