Redundancies and restructuring of the workplace following COVID-19
Posted on 14th July 2020
The Coronavirus Job Retention Scheme announced on 20 March 2020 has undoubtedly been a lifeline for many employers and businesses in supporting their workplace. However, despite its extension to 31 October 2020 it is clear that employers are having to make difficult decisions about their workforce for the future. These decisions could include considering redundancies and any such redundancy procedures will need to be adapted in light of Coronavirus.
We have provided guidance below on some common queries and misconceptions:
If an employee has been furloughed does this mean they will be made redundant?
No. Regardless of whether an employer and employee have agreed for the employee to be placed on furlough leave this does not mean that an employee will automatically be made redundant. If an employer decides that redundancies are necessary, it will still have to follow a fair process and we have provided in our guidance.
Can employees remain on furlough once the government scheme ends?
Yes, provided that the employee continues to agree to be furloughed. However, employers will no longer be able to claim payments from the government for salary/wages.
If an employee is on reduced terms such as a reduction in pay, employers may need a new furlough agreement with them to confirm their agreement to a reduction in pay. An employer may even wish to keep employees on furlough for no pay as an alternative to redundancy which may be something employees agree to in order to avoid redundancy.
Can employees refuse to agree to furlough leave?
Employees should agree to a specific period of furlough and therefore could refuse to agree to an extension to the furlough once the initial period is over. If an employee refuses to consent, employers may have to explore alternatives such as changing employment terms or making redundancies.
Alternatives to redundancy
Can the employer change an employee’s terms of employment to reduce their hours and pay?
Yes, but only with employee agreement. We recommend that employers explain their reasoning behind the proposal in order promote transparency and to encourage employees to understand the need for such a change to their terms of employment. Each individual employee should be informed and their written consent should be obtained.
What can an employer do if an employee refuses to consent to changes to their terms of employment?
We recommend that employers consult each employee individually to explain their rationale and the necessity behind the change. If employees continue to withhold consent then they may be able to dismiss the employee and re-engage them on the new proposed terms. Providing there is a genuine business need for this and employers follow a fair process, then this may constitute a fair dismissal however we strongly recommend that legal advice is sought before such action is taken.
We would highlight however that if an employer is proposing 20 or more dismissals then collective consultation requirements will need to be adhered to which we explain in further detail below.
Are there likely to be more flexible working requests?
It is likely that some staff will require flexible working arrangements as workplaces start to open again. For example staff members may need to arrange childcare and home schooling whilst others may have concerns about travelling to and from work at peak times. We recommend that employers consider each employees request and try to find a mutual arrangement, as such requests may benefit both parties.
Employees who have 26 weeks’ continuous service are entitled to make one formal flexible working request in a 12-month period and in light of the current circumstances it is likely that such requests will be of great help to employees. Whilst employers are not always obliged to agree to such requests they must have a good reason for refusing the request.
Are employers under an obligation to consider placing employees on the furlough scheme instead of making redundancies?
Redundancy is a potentially fair reason for dismissing employees but only provided that there is a genuine reason for redundancy and other alternatives have been considered. The existence of a government funded scheme could be an argument for not making employees redundant and instead relying on such a scheme. However, when considering redundancies the overall fairness should consider all of the circumstances and so despite the existence of the scheme, it may not necessarily be unfair to make employees redundant.
As of 10 June 2020 individuals could not be placed on furlough for the first time. Anyone who has previously been placed on the scheme can be placed back on the scheme but for anyone who was not previously furloughed before this date, they cannot argue that any redundancy is unfair on the basis of the furlough scheme not being considered.
Following the announcement of ‘flexible furlough’, employers will also have to make increased contributions towards employee’s wages which, dependent on each businesses circumstances, may not be possible and mean they have no option other than to consider redundancies.
Do employers need to collectively consult their employees?
As noted above, collective consultation will be required when an employer proposes to dismiss 20 or more employees within a 90 day period. This relates to situations regarding both redundancies and if employers are trying to change employee terms as discussed above.
If collective consultation is required then consultation must start a minimum of 30 days prior to the first dismissal when between 20-99 dismissals are proposed or 45 days prior when 100 or more dismissals are proposed.
Due to the impending end of the scheme, if employers are concerned that they will need to make a number of redundancies we would recommend that they seek legal advice sooner rather than later to ensure that the consultation process is started in time. It can of course be communicated to employees that business needs will be constantly reviewed should the situation improve and redundancies not be required.
It is crucial that employers get this process right as it can be costly if they don’t. The Employment Tribunal can make a ‘protective award’ of up to 90 days’ pay per employee who is affected if an employer fails to meet its collective consultation obligations. Employees who have over 2 years’ service may also have grounds for an unfair dismissal claim on the basis that a fair procedure was not followed.
How has the Coronavirus Job Retention Scheme impacted redundancy procedures?
The scheme was implemented to assist and support businesses with the economic consequences of the Coronavirus pandemic.
The usual rules around redundancy have not changed however, in light of the crisis and whilst the furlough scheme is in place there are additional considerations that employers will need to consider:
- If members of staff are still furloughed and an employer wishes to commence a redundancy consultation process then they will need to consider the logistics of conducting such a process remotely. Collective consultation with employee representatives may be conducted remotely provided that everyone has access to the appropriate technology.
- For those employees who are furloughed, employers will need to consider how they will send all relevant paperwork to them and confirm whether they have access to a computer.
- Employers should take care when deciding on the pool for redundancy and selection criteria. This should not just be simply based on selecting the staff who are furloughed as otherwise this may give rise to unfair dismissal or discrimination claims.
- Ultimately, dismissing employees by reason of redundancy could lead to a claim for unfair dismissal if the correct procedure is not followed and employers did not properly consider an alternative. Whilst the scheme is still operating an alternative could be retaining the employee on the furlough scheme and so this should be considered as an option.
What notice pay does an employer need to pay to an employee who is on furlough leave?
The position on notice pay and furlough leave is complex particularly where an employee has agreed to a reduction in pay (i.e. the 80% covered by the scheme). Employees who are on furlough leave are still entitled to notice of termination of their employment but whether they should be paid 80% or 100% is not straightforward. We recommend employers seek legal advice to avoid any mistakes, particularly if they are hoping to rely on any post-termination restrictions in the employee’s contract.
Firstly, employers should ask how much notice the employee is entitled to receive under their contract of employment. This will determine whether minimum notice payment rights as per the Employment Rights Act 1996 are engaged. If the employee is entitled to at least one week’s greater notice under their contract than what they would under the statutory minimum notice period then the employee’s right to minimum pay during statutory notice does not apply. Unless the furlough agreement (or contract of employment) says otherwise, the employee will only be entitled to the reduced 80% pay during their contractual notice period and so an employer will be able to reclaim some or all of the notice pay under the scheme.
However, if an employee is only entitled to the statutory minimum notice or less than a week above the statutory minimum, then they gain the benefit of minimum guaranteed notice pay rights. Employers then need to consider whether the employee is either: a) incapable of working due to sickness/injury or b) ready and willing to work but is not being supplied with any work which will apply whilst an employee is on furlough leave. Providing either of these criteria are met then employees will be entitled to a statutory minimum payment during their notice period.
The first criteria is rather straightforward and to fall within this category an employee must be incapable of working because they are sick.
The second criteria however is more difficult as to whether an employee who is on furlough is ‘ready and willing’ to work. Employers should take care to look at the reason for that employee being placed on furlough leave. If the reason was because there was insufficient work available then, despite the employee agreeing to be furloughed, they are likely to be considered as ‘ready and willing’ work. If an employee is shielding then the position is difficult however a Tribunal is likely to consider that they are ‘ready and willing’ to work but are unable to do so in line with government guidance on shielding. If employees do qualify for minimum guaranteed notice rights then their notice pay is based on a ‘weeks’ pay’.
The situation however is likely to be different for those employees who asked to be furloughed because they would rather not be at work. It is likely that these employees will not be regarded as ‘ready and willing’ to work and so will not qualify for statutory minimum notice rights. In this situation, the pay they receive for their notice whilst on furlough leave is likely to be what they agreed to receive during their notice (i.e. 80% as covered by the scheme).
It does seem unlikely that the Tribunal will allow employers to pay less than an employee’s normal notice pay when the employee has agreed to furlough leave to allow their employer to benefit from the scheme. If employers are having to make difficult decisions regarding redundancies then we recommend they carefully consider the employee’s notice provisions and perhaps revisit any furlough agreements to make the position on notice pay clear. Employers should take care in ensuring the correct payment is made as if they find themselves in breach of the employment contract by underpaying notice pay they will be breaching the employment contract and unable to rely on any post-termination covenants. We strongly recommend they seek legal advice to avoid this.
What do employers need to pay as redundancy pay and has this been affected by Coronavirus?
Government guidance has made it clear that employees rights will be unaffected by Coronavirus. Providing that an employee has two years continuous service, they will be entitled to a statutory redundancy payment.
Statutory redundancy pay is calculated based on years of service, age and a week’s pay. As of 6 April 2020 a week’s pay is currently capped at £538 per week.
In addition to statutory redundancy, employers should also take care in checking whether their employees have any contractual redundancy rights.
Our specialist employment experts have advised many individuals and businesses regarding the Furlough scheme and redundancy procedure. If you are in need of a legal advice and would like to speak to one of our employment lawyers please call 0808 231 6369 or request a call back online.