What if I need to make employees redundant?
Unfortunately, some businesses may be unable to furlough certain employees or they may feel that they are unable to retain a position after the furlough period ends and the organisation is therefore required to make a person redundant.
Many businesses are now considering whether they need to start the redundancy process when the Coronavirus Job Retention Scheme (CJRS) comes to an end on 30 June 2020.
The rules around redundancy are complex and so to help we have prepared a useful FAQ for you to follow.
Can I make employees redundant during this uncertain period?
As long as you do not intend to furlough a staff member, then yes you can make them redundant, as long as you follow the right procedures.
Of course, many employers are aware that if they can make a person redundant then they could also furlough them to retain their position. Because of this, some employees may feel they have a claim for unfair dismissal if they have at least two years of service and you choose to make them redundant rather than furloughed.
Any employment tribunal would consider an employer’s resources at the time of redundancy and see if the company had no or minor cash flow issues at the time or whether an employee had accepted a cut in pay or a delay in payment of their salary to assist the business.
Depending on the circumstance, a judge may decide that a business acted unfairly to make a person redundant instead of furloughing them to deal with the economic slowdown created by the pandemic.
An employee could also bring a claim for discrimination if they think they were made redundant because of a protected characteristic, such as sex or disability. Employees do not need a minimum length of service to bring such a claim, so take care.
Can I begin the redundancy procedure now?
A statutory redundancy situation arises where either:
- an employer’s need for an employee to do work of a particular kind ceases or reduces; or
- the business in which an employee is employed is shut down, either entirely or at a particular location.
What type of redundancy procedures do I need to follow?
Depending on the numbers of redundancies an employer needs to make they may have to consult collectively with affected employees under the Trade Union & Labour Relations (Consolidation) Act 1992.
The collective consultation period is 30 days if an employer is proposing to dismiss 20 or more employees within a 90 day period, rising to 45 days if it is 100 or more employees.
The CJRS is due to run until at least 30 June 2020, which means that if an employer wants to time redundancies to be effective from the end of the CJRS period before they are contractually bound to pay 100 per cent of the employees’ salaries again, then they will need to start considering commencing consultations shortly.
This means they needed to have started this process on the following dates if they intend to make redundancies on the 30 June 2020:
- 20 or more employees – 31 May 2020
- 100 or more employees – 16 May 2020
If these dates haven’t been met then the employer would have to continue consultation after the employee has returned from furlough, if the CJRS is not extended, and continue to pay wages.
There is an exception to the collective redundancy rules. This rule provides that where special circumstances render it not reasonably practicable to consult in good time or provide the statutory information to employee representatives, the employer need not fully comply with the duty, but must still take such steps towards compliance as are reasonably practicable.
It is not yet fully clear whether this applies to the current pandemic, but businesses should be cautious as they could be penalised if they get this process wrong.
What happens if I intend to make fewer than 20 redundancies?
There are no set rules to follow if there are fewer than 20 redundancies planned, however, it is good practice to consult employees and their representatives before undertaking any redundancies. If you don’t conduct any form of consultation with employees an employment tribunal could decide that you have dismissed your staff unfairly.
What penalties exist if I don’t complete the process properly?
Where an employer fails to comply with its obligations, representatives of those employees affected, or the employees themselves, can make a complaint to an employment tribunal. If the complaint is upheld, the tribunal could order the employer to pay a ‘protective award’ of up to 90 days’ pay per affected employee.
How do I choose who to make redundant?
If the redundancy is being made to reduce your workforce, rather than due to a total closedown of the business, you will need to carefully select who you make redundant.
You can initially consult with your workforce to see whether anyone wishes to be made voluntarily redundant. This will help to reduce the potential pool of candidates and can make the selection and consultation period simpler.
When selecting which employees face compulsory redundancy, employers must ensure they are objective and do not discriminate against the employee(s).
They may wish to use the following criteria as a basis for making their selection:
- timekeeping and attendance;
- disciplinary record.
In the past, many redundancies have been conducted on a ‘last in, first out’ basis, but this has become less common due to the risk of indirectly discriminating by age against younger employees.
It is recommended that you use a scoring process for each employee against these criteria, which is moderated by different scorers to ensure fairness and consistency. Make sure you record this process in writing.
How much will I need to pay a staff member who is made redundant?
When an employee is made redundant they will be entitled to notice pay. The statutory minimum period of notice is one week’s notice for each year of continuous employment, up to a maximum of 12 weeks.
Employees are also eligible for statutory redundancy pay if they meet the qualifying criteria. The amount that they will receive can be calculated here. Some employees may be entitled to more depending on their contract.
Can I pay some staff members more?
It is not uncommon for employers to pay an enhanced redundancy package where they intend to:
- Preserve goodwill of both departing and remaining employees;
- Match market rates or industry norms for such payment; or
- Sign a compromise agreement.
Can I offer a staff member alternative employment?
It is strongly encouraged that you look at alternative employment options within a business for ‘at risk’ employees. If you operate across more than one site and have capacity at another then you may wish to offer them a position elsewhere, if practical. The employer should also consider whether alternative employment is available via an associated employer.
If you offer suitable alternative employment, and an employee makes an unreasonable refusal to undertake the work, then they may lose their entitlement to a statutory redundancy payment.
I have already made an employee redundant because of covid-19. Can I re-employ them and furlough them?
This is tricky. If they were made redundant between the 28 February 2020 and the 19 March 2020 then employers are entitled to rehire employees that were previously made redundant, as long they were still on the payroll as of 28 February 2020.
Unfortunately, if you chose to make someone redundant from 20 March 2020, when you knew the CJRS would be in place, the employee will not be eligible for support.
If you intend to make an employee or group of employees redundant it is strongly advised that you seek professional advice and assistance from a solicitor. To find out how we can help, please contact us.