In these difficult times, coronavirus-hit businesses have access to an unprecedented level of Government support.
Even so, some employers may still need to resort to other options, including redundancies, if they are struggling to stay afloat.
Making redundancies during coronavirus
Jonathan Insley is a Senior Associate in the Employment Law team at Tees explains that whilst under normal circumstances, redundancy can be a legitimate reason for an employer to dismiss employees. The employer must show justifiable grounds for redundancy and follow a fair process before dismissal, including meaningful consultation.
In the current climate, however, employers will have other factors to consider. First, they’ll need to consider whether temporary government support measures, such as the Coronavirus Job Retention Scheme, could help prevent redundancies. In order to get back on their feet as quickly as possible once the crisis as passed, it seems sensible to first consider furloughing staff before taking the redundancy route. They will also need to think about how best to communicate with employees while following social distancing rules.
If you believe your redundancy plans will affect more than 20 employees (including employees you plan to dismiss and re-hire on different terms), then you will have to follow special rules called the ‘collective consultation’ process.
The collective consultation regime includes circumstances under which you plan to make employees redundant and re-engage them on new terms. Seek specific advice on your circumstances if you are considering this.
The redundancy process
Your redundancy process must also be fair, and will usually include:
- Listing potentially affected employees;
- Notifying affected employees that they may face redundancy;
- Consulting with these employees;
- Abiding by a fair, non-discriminatory selection criteria;
- Looking at possible alternatives to redundancy.
A meaningful consultation is vital to a fair redundancy process. If you’re planning less than 20 redundancies, there is no limit on the length of the consultation period. However, you must begin consultation 30 days before the first redundancy if you’re making between 20 and 99 employees redundant, or 45 days before for over 100 redundancies. ACAS also recommends formulating a redundancy plan to help you navigate the process.
Following a fair redundancy procedure
Your first step will usually be to warn all potentially affected employees (and their representatives, for collective redundancies) that you may need to make redundancies. This takes the form of a written notification following a meeting with affected employees. Under lockdown conditions, this meeting would most likely be virtual.
The next step is selecting employees for redundancy. This step will be carried out when you don’t have enough work for all your employees, but will still need to retain some. Your selection process should be fair and objective.
If the consultation process shows there are no alternatives to redundancy, then the employer will give notice of termination to the selected employees. They will then be given the opportunity to appeal this decision.
Avoiding selection issues through voluntary redundancy
Employees are more likely to view their dismissal as fair if they see their employer has explored all available options to avoid compulsory redundancies.
At an early stage in the process, for example, employers could ask if any employees wished to volunteer for redundancy, thereby minimising compulsory redundancies. The employer should specify those employees who may apply, to avoid losing too many employees or those key to the business’s success.
Furloughing staff to avoid redundancies
Following the Government’s announcement that the Coronavirus Job Retention Scheme is now available to employers of all sizes, redundancy should be a last resort for employers who have exhausted all other options. The scheme reimburses employers for 80% of furloughed staff’s wages, up to a cap of £2,500.
However, some employers may find this option is unsuitable for their circumstances, or have employees that are ineligible for the scheme. The scheme isn’t compulsory, so employers may still need to use redundancy as a way of reducing costs and employee numbers.
Demonstrating that the employer has been fair and communicated adequately with affected staff will be essential in minimising the risk of claims or issues.
Employers who use the furlough scheme, and can demonstrate that they’ve taken all possible steps to avoid compulsory redundancies, will be better placed to defend any later claims of unfair dismissal.
Breaking down redundancy pay
Workers who have been employed for over two years will be entitled to a statutory redundancy payment, which will depend on their age, length of employment and weekly gross pay.
Weekly gross pay is capped at £538 for redundancy purposes (as of April 2020). This will increase again in April 2021.
Some employers may offer a contractual right to enhanced redundancy pay, to which they will remain entitled as part of their redundancy package.
Giving notice
Employers must give notice to affected employees. This can be worked or paid (if the employment contract allows it). The notice period will normally be set out in the contract, and you should follow statutory minimum notice requirements based on the employee’s length of service. The statutory entitlement is normally one week per year of employment, up to a maximum of 12 weeks.
Employers also need to pay their employees for any outstanding annual leave they may have accrued, but not taken. However, the employee may be able to take this holiday during their notice period.
Employees who have spent at least two years with the employer, and who are working their notice, are also entitled to reasonable time off to search for another job.
Employers who are facing cash flow issues should therefore carefully consider the costs and implications associated with redundancies, particularly when making many within a relatively short space of time.
Photo by Johanna Buguet on Unsplash
