Furlough and Redundancies
The Coronavirus pandemic has caused, and will continue to cause for the foreseeable future, seismic changes to the business landscape. The creation of the Coronavirus Job Retention Scheme (Furlough Scheme) has saved countless jobs and will help businesses stay afloat during this period. However, the scheme is currently due to end on 31 May 2020 and it is important that businesses begin to plan an exit strategy for when the scheme ends. Unfortunately, for many businesses, this will involve making redundancies.
If an employer makes an employee redundant as soon as the Furlough Scheme ends, without carrying out any consultation process, it is possible that the business could be on the receiving end of an employment tribunal claim.
For a number of good reasons, it is imperative to start thinking about beginning the redundancy process as early as possible. Commercially, perhaps the most important benefit of planning the redundancy process in advance is that the business will be able to make employees redundant immediately when the Furlough Scheme ends, as opposed to having to commence the process at that point.
Depending on the number of employees being made redundant and their notice entitlement, it may be possible to complete a consultation and run some (or even all) of the notice during the period that the Furlough Scheme is in operation. This would create considerable savings.
It always important to carry out a full and fair redundancy procedure but if you are planning on making at least 20 employees redundant, there will be collective consultation obligations to comply with. Failure to do so could lead to potentially significant financial penalties. The maximum protective award is up to 90 days’ gross pay for each dismissed employee. Given the current climate, and the reasons for needing to make the redundancies in the first place, it is important not to slip up in the consultation process.
Where the planned redundancy numbers are 20 or over, consultation starts with informing appropriate representatives, and, where necessary, notifying the Department for Business, Energy and Industrial Strategy. There are also minimum time periods depending on the scale of redundancies. For between 20-99 redundancies, the minimum period is 30 days. Even if you are making less than 20 redundancies, the importance of consultation cannot be understated. The Government has been at pains to point out that normal employment law applies during the current Covid crisis.
The CBI has warned that these requirements may mean companies are compelled to make permanent job cuts despite the Furlough Scheme. This is because the Furlough Scheme is set for three months (although the Chancellor will review and extend it for longer if necessary) where large numbers of redundancies are planned, there is a need to get consultation under way quickly, even if it means reviewing the situation at a later date and retracting dismissal notices where business requirements change. With the Government’s main aim being to keep people employed it is difficult to see it relaxing the consultation rules despite the logic of the CBI.
As you would expect, there is a lot more to the process than we can include in this brief update. Of course, we can guide you through this, if it becomes necessary, and so please get in touch with us if you have any queries regarding the specifics of carrying out a successful redundancy process.
Louis Howlett, Solicitor