Redundancy – what to do if you have to……..

Posted on Tuesday June 30, 2020

Joanna Alexiou profile image

By Joanna Alexiou, Head of Employment at Mackrell.Solicitors

The Coronavirus Job Retention Scheme (CJRS) continues to play a critical role in keeping millions employed, but the rules have now changed and the scheme as a whole will end in October.

More than 8.9 million people have been furloughed in the UK and the essential scheme is thought to have cost the Government £20 billion.

Although elements of the UK economy are now able to restart their recovery, there are growing doubts that not all jobs can be retained, leaving companies with little option but to make employees redundant.

Under the latest CJRS guidance, employers will be able to bring back employees part-time from July as long as they pay employees for the time worked, while the Government covers the regular hours not worked. This new system of flexible furlough should help businesses to begin the recovery process sooner.

From 1 August, CJRS grants will then cease to cover the costs of employer NICs and pension contributions in respect of furlough pay.

Then, in September, the value of CJRS grants will reduce to 70 per cent of furloughed employees’ usual wages, with employers required to pay the remaining 10 per cent so that employees still receive 80 per cent of their usual wages, capped at £2,500 a month.

Finally, in October the value of the Government’s CJRS grants falls to 60 per cent of furloughed employees’ usual wages, with employers having to contribute the remaining 20 per cent.

This will ensure that employees continue to receive a minimum level of support up to 80 per cent of their wages.

Unfortunately, these mounting costs may force the hand of employers to lay off staff, reduce hours, cut pay and in-work benefits or seek redundancy.

This final option is the most extreme of the four, but it is likely to be one that some businesses feel the need to take despite the support on offer, especially when the CJRS ends in October.

When to think about it…………

Redundancy in the UK is a fairly formalised procedure, especially were 20 or more employees are likely to be made redundant.

In these organisations, where collective redundancy is required for more than 20 staff members in a 90-day period, there is a need to let the Secretary of State and staff know 30 days in advance of the first dismissal.

Where 100 or more people are to be made redundant then 45 days’ notice must be given. This is to allow for proper consultation with employees, unions and other representatives.

Even where fewer than 20 redundancies are planned, it is still considered good practice to offer a consultation period, which may allow for voluntary redundancy for some employees.

If the current Government dates for bringing furloughing to an end remain, this means that for organisations planning to make significant redundancies of more than 100 members of staff as a result of the CJRS finishing they must make their intentions known by 16th September 2020 or by the 1st of October where businesses intend to conduct redundancies of fewer than 100 staff members.

What to think about…………

Many Employers will see redundancy as a backwards step for their business, as it will significantly affect productivity, capability and their potential talent pool.

However, employment costs are a large part of a business’s expenditure and so inevitably some employers will need to take action.

Those intending to make redundancies must ensure they comply with the rules and do not discriminate against certain individuals or groups of employees when selecting employees for redundancy.

For a dismissal or redundancy to be fair the employer must establish that redundancy was the real reason for the dismissal.

This is in part because any tribunal must find that the employer acted reasonably, in all the circumstances of the case, in treating redundancy as the reason for dismissing the employee. In practice, this means an employer must follow the “procedural fairness” guidelines.

These guidelines are based on case law and stipulate that an employer has not acted reasonably and dismissal will, therefore, be unfair unless it:

  • Warns and consults employees, or their representative(s), about the proposed redundancy.
  • Adopts a fair basis on which to select for redundancy. An employer must identify an appropriate pool from which to select potentially redundant employees and must select against proper criteria.
  • Considers suitable alternative employment. An employer must search for and, if it is available, offer suitable alternative employment within its organisation.

Employers also need to establish a genuine redundancy situation and this will usually hinge on whether the business closes altogether, a place of work closes or there is there a reduced requirement for employees to carry out work of a particular kind.

What to do………….

Companies that believe they may need to make redundancies soon should consider who they intend to let go.

Making redundancies can be an emotional and difficult experience for all employers, but they must make sure that when doing so they do not conduct themselves in a discriminatory manner.

For example, many employers often choose the method of last in, first out, so that those with the shortest length of service go first. However, employers must consider whether this would discriminate against a particular age group, such as younger employees with less experience.

To ensure the redundancy process is fair employers may wish to consider using a points-based system, which takes into consideration key characteristics, such as:

  • qualifications;
  • experience;
  • performance;
  • timekeeping and attendance;
  • necessity for ongoing business operations;
  • disciplinary record.

Points can be awarded on merit for each characteristic by a panel of three or more members of the management team, with the person(s) awarded the least points placed in the pool of redundancies.

During this process, consider whether any employees are pregnant, or on maternity, adoption or shared parental leave as special rules apply to them on redundancy.

Some employees may also wish to take voluntary redundancy and so this option should be offered as well.

This process can be time-consuming and should be done in the strictest confidence. It is, therefore, important that businesses give themselves plenty of time to build and consider their redundancy pool in anticipation of having to consult with employees.

Once the redundancy process is underway employers will need to fulfil steps to remain compliant with redundancy legislation and so it makes sense to prepare as much as they can beforehand to ensure that the process is smooth and well-administered.

Seek professional advice 

Making redundancies carries a lot of legal risks, which is why it’s advisable to seek the advice of an employment lawyer.

This can help to identify members of the pool from an objective standpoint, prevent any actions that might be considered discriminatory and ensure all necessary actions are taken.

With a potential for redundancies later this year it is important that employers seek help sooner rather than later to ensure they have the support they require.

To find out how the Employment Law team at Mackrell.Solicitors can help please contact Joanna Alexiou.