With just nine weeks to go until the furlough scheme is set to be withdrawn for good, employers now need to decide how to handle those employees that have been placed on it. Nick Hine and Ben Payne remind organisations of what they should be thinking about when considering redundancies.
The Coronavirus Job Retention Scheme (the furlough scheme) has provided support to thousands of businesses during pandemic, despite originally being only intended to be in place for three months. However, with the recent lifting of nearly all coronavirus restrictions in England, it appears unlikely that the scheme will continue beyond 30 September 2021.
The scheme has enabled employers to retain employees with a view to them returning to work as business and the economy picks up. Many furloughed employees have now returned to work, but for those who haven’t, businesses should decide whether they can afford to have them return. If not, organisations need to know how to handle a possible reduction in headcount. We set out some of the key considerations below.
Claims for notice periods
Under previous iterations of the furlough scheme, employers were able to still claim for those employees serving their notice periods ahead of redundancy. This was a significant saving for employers, with many acting quickly to make redundancies to take advantage of the generosity of the scheme. However, the rules of the scheme changed on 1 December 2020, meaning it is no longer possible for an employer to claim furlough money for any employee serving their notice. In addition, it is not possible to claim any money from the scheme towards redundancy payments which may be due.
Employers need to factor in the length of notice periods when considering headcount reduction.
Payments to staff
Employers should note that all employees who have two years or more service are entitled to a statutory redundancy payment and can claim unfair dismissal if the reason for dismissal is not a genuine redundancy. Some employers have put poor performing employees on furlough and now do not want them back even if there is work for them to do.
Redundancy
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They should also consider if employees have any accrued but untaken holiday which may need to be paid out upon termination. The contract may allow the employer to determine that this is taken as part of their notice so that it is not being paid twice. An employer may therefore decide it is better to act sooner rather than later, especially given they will be liable for 100% of salary from 1 October 2021.
Employers should consider if there are any possible alternatives to redundancy, given the potential cost involved, particularly for high paid and long-serving employees. Alternatives could include agreeing with the employee to reduce hours or to move them into alternative roles.
Redudancy consultations
If an employer intends to make 20 or more redundancies within a 90-day period, they will be obliged to collectively consult with its employees. This requires nominating and electing employee representatives as well as consulting for a minimum of either 30 or 45 days depending on the number of employees affected. This is a big undertaking for any employer, and for this reason it makes sense to plan such a process well in advance.
Even if there are fewer than 20 employees being made redundant within a 90-day period, an employer still has an obligation to consult with those employees affected. This means the employee should be given the opportunity to respond and comment on any proposals as well as being considered for any suitable alternative vacancies. If it fails to follow the correct and a fair procedure, it risks unfair dismissal claims from those employees affected.
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If you decide you need to make headcount reductions as the furlough scheme ends, plan now and do not wait until 30 September 2021. We find that planning ahead with our clients makes the process go smoothly and avoids time-consuming and expensive claims.
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