Redundancy and Furlough - Part 1

The pandemic has not just cost billions, it’s fundamentally changed the way we do business and that inevitably has an impact on resourcing. Over the last week or two, I have spent about 80% of my time discussing and planning restructures and redundancies with clients and the remaining 20% supporting clients who have already started redundancy consultations.

The Government guidance for employees who have been furloughed say that employees’ redundancy rights continue to apply while they are furloughed so it’s reasonable to assume that employees can be made redundant while on furlough or afterwards. Redundancy is one of the five fair reasons for dismissal. Pandemic or not, any redundancy process must be fair and it must be fairly applied.

There is an argument that it may be unfair to make employees redundant when the government-funded furlough scheme is available, but there may be circumstances where a business may have to review resourcing at an early stage. For example, where lengthy consultation processes are required, or the notice period is 12 weeks or more.

Each case turns on its own facts and the fairness of a redundancy dismissal will depend on the circumstances pertaining at the time, so it is not necessarily unfair to make employees redundant when the furlough scheme is still running.

Redundancy process

The CJRS guidance does not expressly consider whether consultation can be carried out during the furlough period, or whether it would fall under the prohibition on doing work. However, as redundancy consultation is not making money for the employer or providing services, it is probably within scope.

Statutory notice is one week per year of service, up to a maximum of 12 weeks.

If you make a payment in lieu of notice under a clause in the employment contract, check what the contract says about the amount. If it says that pay in lieu of notice should be calculated based on basic pay, treat it as meaning pre-furlough normal pay.

If the employee’s contractual notice period is at least a week more than the statutory minimum period of notice, they can be paid notice at their furlough rate of pay (for all weeks which fall within the furlough period).

For employees with normal working hours and fixed pay or salary, a statutory week’s pay is a normal week’s pay. A statutory week’s pay is based on an employee’s normal working hours. Normal working hours and pay should be based on pre-furlough conditions.

For employees with normal working hours whose pay varies according to the times they work (e.g. because they work shifts), a statutory week’s pay is calculated by averaging pay for the previous 12 working weeks. Again, because no work at all is done during furlough, this means pre-furlough weeks.

If the redundant employees don’t have normal working hours, a statutory week’s pay is based on their pay over the previous 12 weeks. This excludes any unpaid weeks but is not limited to working weeks. For employees who fall into this category, you can base the calculation on the previous 12 paid weeks, including weeks on furlough.

You should be able to reclaim notice pay if an employee is given notice during furlough, for those weeks of notice which fall within the furlough period. You cannot reclaim any extra “top up” to usual pay which may be legally required.

Payment in lieu of notice cannot be reclaimed under the scheme, because this is a discretionary payment.

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DISCLAIMER

Although every effort has been made to ensure the accuracy of the information contained in this blog, nothing herein should be construed as giving advice and no responsibility will be taken for inaccuracies or errors.

Copyright © 2020 all rights reserved. You may copy or distribute this blog as long as this copyright notice and full information about contacting the author are attached. The author is Kate Russell of Russell HR Consulting Ltd.