At the time of writing, Freedom Day due on 21 June has been postponed for four weeks. Rishi Sunak has rejected pleas from businesses to extend the furlough scheme and says it will begin to phase it out from 1 July.
Job Retention Scheme
The Coronavirus Job Retention Scheme (CJRS), or furlough, was the Chancellor’s scheme announced before the start of lockdown in March 2020.
It was initially designed as short-term protection for jobs and livelihoods and was extended to run until 30 September 2021.
The Chancellor’s announcement that the opening up of the country is to be deferred and that the scheme will not be extended could leave many businesses in a very difficult situation.
Despite the measures put in place, many people have and unfortunately will still lose their jobs across many sectors. The percentage of those on furlough rose between October 2020 and January 2021. There is evidence which suggests that the scheme has helped employers avoid additional redundancies. Many employers are now planning how their future workforce will look.
This is going to prove a major challenge for some small businesses. Many are already only just surviving this crisis. Employees on furlough with a long service record facing redundancy are the most experienced and the most expensive to make redundant last year. The looming costs could well push businesses under.
Furlough to redundancy
Whatever the situation, employment law will continue to apply. During the pandemic, employers have been under scrutiny over the way redundancy procedures are handled. Consequently, the correct procedures must be followed at all times.
From 1 December 2020, notice periods can no longer be claimed using the CRJS scheme. Meaning that an employee’s furlough period must end the day before their notice period starts. Employers will therefore be liable for 100% of the cost of the employee’s notice period. Employers are also not allowed to use furlough payments to cover redundancy payments.
Contractual notice periods for redundancy
The guidance is not clear regarding the calculation of contractual notice pay over and above statutory minimum notice pay. Some employees have notice periods set out in their contract of employment, which are longer than the mandatory statutory minimums.
So basically:
- if an employee is entitled only to the statutory minimum notice period, the employer must pay 100 percent of the employee’s regular pay in respect of that notice period; but
- if the notice period set out in an individual’s employment contract is at least one week more than the statutory minimum, the employer can pay them their reduced rate of pay in respect of their notice period.
Discrimination
While it may be obvious to consider employees on furlough for redundancy before looking to the wider workforce, employers should remember that the usual discrimination protections continue to apply. Businesses should not automatically restrict the redundancy pool to furloughed employees. Consideration must be given to the criteria applied to select employees from the pool to minimise the risk of discrimination claims.
Employers must be careful not to leave themselves open to criticism when making people redundant. Before making a final decision, factors such as skill, quality of work, prior attendance, and disciplinary records should all be considered thoroughly.
Backlash to redundancy
Treating employees in a way that looks to be taking advantage of the furlough scheme is likely to cause damage to reputation. It should also be considered what impact this might have on the morale and loyalty of those they need to retain, as well as the impact on customers and clients.
It is imperative to consider alternatives to redundancy, such as recruitment freezes, redeployment, delaying wage increases, not paying a discretionary bonus, or terminating temporary or agency employees in accordance with their contracts.
The costs and legal implications mean redundancy must be a well-considered choice. Kidwells Accountancy has written more about the staff costs involved in redundancy.
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If you are in the difficult process of reducing your workforce, get the answers to your redundancy questions today. Call us on 01432 278 179, use the form below, or message our webchat to ask our legal team for advice.