Redundancy and Furloughed Employees

Unfortunately but understandably most of the conversations we’re having with companies at present are around reducing costs, especially staff costs through redundancies.

The vast majority of these companies have used the furlough scheme to support them through this incredibly difficult period.

Whereas I am sure the government will reflect on whether certain aspects during the pandemic could have been handled better, there seems little doubt that the furlough scheme has helped businesses significantly and helped the country avoid the mass redundancies we all feared while we come to terms with the ‘new normal’.

But did it simply kick the can down the street and postpone the inevitable? With the scheme coming to an end in October there are various reports of significant numbers of redundancies planned throughout the country.

By now business owners seem to have a better idea of what the short term future holds in terms of turnover, costs and profit and are planning accordingly. Many are concluding that the business cannot support the costs of some or all of their furloughed workers returning.

A great deal of companies are therefore considering making redundancies, often for the first time, and if that is the case in your organisation then the quotation I heard from an Employment Tribunal judge a few years ago is as relevant now as always:

‘If you want me to find in your favour at Tribunal then follow the law, follow your policy, and act reasonably’.

Employment Tribunal judge

Breaking this down, there is surprisingly little law regarding making redundancies and certainly no new legislation we are aware of concerning furloughed employees. The general yardstick is to follow the ACAS Code of Conduct for redundancies and that is usually what Tribunals expect companies to have done.

186hr has produced a free guide, the 8 Steps to Making Redundancies, that is based on the ACAS guidelines.

With regards to following your company’s redundancy policy, we find SMEs rarely have a specific policy and that is fine, there is no legal requirement to have one. Although if you are considering redundancies this may be a good starting point for you, just be careful how you communicate it as it might be a bit of a giveaway when you announce this new policy to the team!

So with few legal stipulations and in the absence of a company policy, the main requirement is to act ‘reasonably’. See our free guide for further details on how to achieve this.

Of the 8 stages in the redundancy process the main ones that are impacted by employees having been furloughed are the requirement to consult with affected employees and the required payments to those who are made redundant.

Our full guide, the Practical Guide to Making Redundancies supports companies of all sizes to carry out this difficult task fairly, legally and to enable people to leave your organisation with dignity and ready to face their next challenge rather than feeling they were treated unfairly.

Normally redundancy consultation with employees takes place face to face either individually or with elected Representatives but there is nothing to say these meetings must be face to face. We believe it would be perfectly reasonable, especially for employees who are shielding, for you to consult with them as normal but remotely either on the phone or via Skype, Zoom etc. and in fact we have done this in the past with no issues.

With regards to the various redundancy related payments to furloughed employees once you have consulted with them and followed the other ACAS requirements, redundancy pay should be paid as normal and is not affected by furlough, see gov.uk for details of the Statutory scheme and how to calculate payments.

It is fine to give employees notice of redundancy whilst furloughed and for them to continue to receive the government’s furlough pay during this period, although you will need to top this up to 100 percent of average pay during the notice period. In effect you are placing them on Garden Leave for their notice period but the government is paying for most of it.

You are not able to claim government furlough payments for any notice paid ‘in lieu’.

With regards to holiday pay, entitlement will have continued to accrue during the furlough period and any outstanding holiday pay as at the redundancy date will need to be paid at 100 percent of average pay. However, as long as your policies and contract of employment allow it you can specify that any holidays outstanding are taken during the furlough period, in which case you need to top up the pay to 100 percent. You can also specify that holidays are taken during Garden Leave, in which case you will already be topping up pay to 100 percent anyway so there would be no extra cost for this holiday pay. When doing this you will need to clearly communicate with those affected before putting it in to practice.

Our full guide, the Practical Guide to Making Redundancies, explains all your legal requirements and provides you with a model redundancy policy from CIPD to adapt to your company if you need it. With regards to the requirement to ‘act reasonably’, following the guide will enable you to achieve that.