Published: August 20th, 2020
The coronavirus pandemic has proved to be immensely disruptive to businesses of all sizes, from all sectors. It has forced companies and their staff to overhaul their working practices considerably and has left many businesses facing closure as the cumulative effect of reduced trading and the withdrawal of government subsidies take effect.
Businesses have had no choice but to review their staffing levelsduring this difficult period. The Coronavirus Job Retention Scheme has had a considerable impact on these decisions, saving many from redundancy, but its withdrawal is imminent, and many companies must now consider whether they need to make redundancies.
The Coronavirus retention scheme
The Coronavirus Job Retention Scheme was introduced in March 2020. The purpose of the initiative was to assist companies in dealing with the effects of COVID-19. It enabled companies to place their staff on furlough so they could still receive pay whilst being unable to work.
For the first part of the scheme, employers were able to reclaim 80% of their staff wages up to £2,500 each month. In the second iteration of the scheme, employers can place their staff on partial furlough whilst they work on a part-time basis.
Although employers do need to pay for working time, grants can be claimed as long as certain conditions are met. In September, employers will need to pay 10% of furlough pay, which is set to rise to 20% in October. From August, they must start paying their employers’ NI and pension contributions.
Can I make furloughed staff redundant?
Although redundancy rules have remained the same, there are several things employers must be aware of. Employers must think carefully before making staff redundant just because they have been furloughed. Not following the correct procedure could result in legal action including claims for unfair dismissal.
Those staff who have been made redundant must be paid their full salary throughout their notice period regardless of whether they have been furloughed. It’s important to note that redundancy pay and outstanding annual leave is based on their full normal salary.
Considerable redundancies expected
A sizeable wave of redundancies is predicted as companies seek to downsize and claw back funds lost due to the crisis. There are some concerns that companies planning on making redundancies at the end of the furlough scheme could be seen as abusing the system.
Nonetheless, many companies will feel they have little choice but to downsize their workforces in order to adapt to the ‘new normal’, especially if there is a continued drop in demand for their products and services.
The old rules still apply
While the CJRS marked a remarkable intervention by the state into both the public and private sector, no laws or guidance have changed regarding making redundancies.
Therefore it remains vital to consult staff and ask for their feedback before redundancy proposals are finalised, even if they have been on furlough. Meetings need to occur individually and collectively, but they may need to happen remotely due to the nature of the current situation.
Solutions such as Skype and Zoom may need to be used so consultations can take place. It’s still important to allow employees the chance to bring someone with them to the meeting if this is your usual policy. Employees and staff representatives can still ‘accompany’ their colleagues to meetings even if they are also furloughed.
Unions, union representatives and staff representatives
Employers must consult the relevant trade union or staff representatives if they wish to make at least 20 redundancies in a 90-day period. The consultation must begin within 30 days if less than 100 redundancies are planned, or within 45 days if 100 or more are likely to happen. It may be much harder for representatives to be appointed quickly due to the current situation, and consultation may need to wait until elections have occurred.
Fairness, objectivity and reasonability
The redundancy selection criteria and process cannot be discriminatory, either directly or indirectly, and staff must be consulted about the criteria and process before they are finalised. All employment laws and rights remain in place. This means fairness, objectivity and reasonability are just as important as they have always been.
If a furloughed member of staff is to be made redundant, it’s important to think carefully about why they were chosen for furlough, what the original processes and criteria were and how fair they were.
Employers making staff redundant who were furloughed due to family caring duties and shielding requirements could be viewed as acting in a discriminatory manner. Making someone redundant now when they could stay on furlough until the scheme ends could be seen as unfair dismissal. It remains important for employers to see if any alternatives to redundancy are viable, such as placing the employee in another role.
Employers are being urged to only make furloughed staff redundant if they have a genuine, fair reason for doing so and if all redundancy procedures have been followed carefully. Any furloughed employee chosen for redundancy must be offered redundancy pay as usual if they have worked for you for two years.
What can’t employers claim for?
Employers won’t be able to reclaim statutory redundancy payments, payments in lieu of notice or untaken annual leave, extra compensatory payments for termination of employment or contractual redundancy payments.
They may be able to reclaim up to 80% notice pay or annual leave taken during the notice period. Annual leave still builds up even when employees are on furlough, and they remain entitled to it. They can cover the cost of untaken annual leave via a furlough grant, but they must top it up to meet the employee’s pre-furlough salary.
Who can currently be furloughed?
Employees can only be furloughed if they have already been on furlough before the 11th June 2020 or if they are returning from maternity, adoption, paternity, shared parental or parental bereavement leave. If these criteria are met, the employer must have used the scheme to furlough other members of staff.
An employee can be furloughed on a full-time or part-time basis. For example, they could work 3 days a week and be furloughed for the other 2 days. Those that have been working from home for an employer during the pandemic are expected to be paid as they normally would be.
The CJRS has been responsible for paying the wages (or a proportion of them) for 9.4 million people. An astonishing number to be sure and the hope is that UK PLC can resume the responsibility for their continued employment when the scheme ends.
This maybe wishful thinking for some companies who currently see no end in sight to the difficulties brought about by Covid 19. If you are experiencing trading issues or wish to discuss how your business will operate after the support ends then please consider reaching out to the team at TFMC.
We are an established accountancy practice with sites across the UK and you can contact us on 0800 470 4820 or alternatively send us an email at [email protected]