Redundancies and restructuring of the workplace following COVID-19

Posted on 14th July 2020

The Coronavirus Job Retention Scheme announced earlier this year has undoubtedly been a lifeline for many employers and businesses struggling with the economic impacts of lockdown. Despite the scheme’s extension through to October, many businesses are still reeling from the initial lockdown period. Even with the financial assistance, many employers are facing with difficult decisions regarding the future of their workforce.

These decisions could include considering redundancies and any such redundancy procedures will need to be adapted in light the continuing crisis.

We have provided guidance below on some common queries and misconceptions.

Furlough

If an employee has been furloughed does this mean they will be made redundant?

No. Being on furlough does not mean that an employee will automatically be made redundant. If an employer decides that redundancies are necessary, they will still have to follow a fair process and we have provided guidance on this here.

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.

Can employees refuse to agree to furlough leave?

Employees should agree to a specific period of furlough and 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?

Employers should consult each employee individually to explain their rationale and the necessity behind the change. If employees continue to withhold consent, then an employer 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.

If an employer is proposing 20 or more dismissals, then collective consultation requirements will need to be adhered to.

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. Some staff members may need to arrange childcare and home schooling whilst others may have concerns about travelling to and from work at peak times. It’s best to try and 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 to do so.

Redundancy

Are employers under an obligation to consider placing employees on the furlough scheme instead of making redundancies?

No. Redundancy is a fair reason for dismissing employees, if there is genuine reason for redundancy. The existence of a government funded scheme could be an argument for not making employees redundant and instead relying on such a scheme in times of financial hardship.

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?

Collective consultation will be required when an employer proposes to dismiss 20 or more employees within a 90-day period. This relates to both redundancies and if employers are trying to change employee terms as discussed above.

If this 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 two 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, while the furlough scheme is in place there are additional considerations that employers will need to consider, including:

  • Remote working logistics. If an employer wishes to commence a redundancy consultation process, then they will need to consider the logistics of conducting it remotely and ensure all parties have access to the appropriate technology.
  • Selection criteria. 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.
  • Potential unfair dismissal claims. 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.

What notice pay does an employer need to pay to an employee who is on furlough leave?

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. Employers should seek legal advice to avoid any mistakes, particularly if they are hoping to rely on any post-termination restrictions in the employee’s contract.

As an employer, you should keep in mind:

  • How much notice the employee is entitled to.
  • Whether the employee is entitled to statutory minimum pay during their notice period.
  • Whether an employee is able to work, isolating or off sick.
  • If you are able to provide enough work for an employee.

On furlough leave

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 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.

What do employers need to pay as redundancy pay and has coronavirus affected this?

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 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.

For more clarification, head to our employment law page, where you’ll find more legal guidance.

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. 

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