Can I make redundancies before the CJRS closes?
Yes. The CJRS employee guidance confirms that employees can be made redundant while on furlough, and their redundancy rights are unaffected by being on furlough.
Do I still need to consult with employees?
Yes, consultation is part of a fair redundancy procedure. It is essential that you do not just move from an employee being on furlough to you telling the employee that they are redundant. Depending on how many employees are affected by the redundancy you may also have to collectively consult. If 20 or more redundancies are proposed in one establishment within a 90 day period then you will need to collectively consult for a minimum of 30 days prior to the first dismissal taking effect. If 100 or more are proposed you will need to collectively consult for a minimum of 45 days.
Can I carry out consultation with furloughed employees?
Our view is that this is possible albeit there is no definitive guidance from Government confirming this is the case. Although there is a restriction on carrying out work for the employer while furloughed, engaging in individual consultation is unlikely to be classified as work. In addtion the employee guidance states that employees can be made redundant while on furlough, and that they retain their existing employment rights - that would include being subject to a fair redundancy procedure.
I am proposing to make fewer than 20 employees redundant - what procedure should I follow?
If you are proposing fewer than 20 redundancies then you do not need to collectively consult but you will still need to consult in most cases. For employees who, at the date of any termination, will have 2 years or more service, you will need to ensure that any dismissal for redundancy is fair. Employees with this length of service will also qualify for redundancy pay.
A "fair" redundancy will include:-
- a fair basis for selection; and
- consideration of alternative employment.
Care should be taken when deciding upon the selection criteria to be used to ensure it is not discriminatory. Employers should expect to meet with employees on at least two occasions, to discuss with them the reasons for the redundancy, their selection and any proposed alternatives. The employee should be encouraged to contribute to these discussions with any ideas they may have to avoid the redundancy. On termination employees will need to be given (1) statutory or contractual notice - the notice period can run while the employee is furloughed - (2) redundancy pay and (3) any pay for accrued but untaken holidays. Employees may be required to take holidays during the notice period subject to the employees' agreement or the appropriate notice being given under the Working Time Regulations. While taking holidays the furlough pay may need to be topped up to 100% of normal pay.
I am proposing 20 or more redundancies - what procedure should I follow?
If you have 20 or more employees that will be made redundant within a 90 day period at one establishment you will need to undertake collective consultation. In broad terms if collective consultation is required employers need to:-
- identify the affected employees;
- identify (1) if there are already appropriate representatives in place relating to the affected employees - either union or employee representatives - or (2) if elections are required to ensure that all categories of those affected are represented;
- provide specific information as set out in s188(4) of the Trade Union and Labour Relations (Consolidation) Act 1992 during the period of consultation;
- consult "with a view to reaching agreement" on
- avoiding dismissals;
- reducing the number of employees to be dismissed; and
- mitigating the consequences of dismissal.
No dismissals should take effect until the end of the minimum consultation period (30 or 45 days). In theory notice could be given during the consultation period, with the first dismissal taking effect 31 or 46 days after consultation started. However, in order to avoid a claim based on an argument that full collective consultation has not been completed at the time notice was given, we do not recommend this without legal advice being taken on this point.
Employers must also notify the Secretary of State of the proposed redundancies by completing an HR1 form. Failure to do so carries criminal sanctions.
Overall this is a complicated area and unless you are very familiar with the process we strongly recommend that legal advice is taken.
If I am collectively consulting do I need to individually consult as well?
Collective consultation does not eliminate the need to consult with the individual employees. The requirements of collective consultation (see above) are set out in statute and there are a number of prescribed matters which must be covered. Individual consultation (see above) is about fairness and reasonableness derived from the stautory protection of unfair dismissal set out in the Employment Rights Act and interpreted by case law. In some cases collective consultation may make the employers obligation to consult individually less onerous - this will depend on the facts of each case - but it should be assumed that it will still be required.
What are the consequences of failing to collectively consult?
If consultation is not carried out, or not carried out fully, then a protective award of up to 90 days' pay per employee may be awarded by a tribunal. This can result in very significant awards being made depending on the number of employees. The amount of the award is "just and equitable in all the circumstances having regard to the seriousness of the employer's default". In practice, that means an employer that has attempted to do some consultation is likely to have a lower award made against them than an employer that has done nothing.
Can employee or trade union representatives who are furloughed carry out consultation?
The guidance on what an employee can do while furloughed indicates that representatives can undertake duties and activities for the purposes of individual or collective consultation while furloughed as long as, in doing so, they are not providing services or generating revenue for the employer or any linked or associated organisation.
What issues should I look out for when carrying out collective consultation remotely?
Remote collective consultation will be more complicated and employers should try to identify what problems are likely to arise and how to resolve them before consultation begins. Potential issues include:-
- How will the employer communicate with the representatives - do they have access to technology that allows for virtual face to face meetings to take place (such as Zoom) or will consultation need to be carried out via group telephone calls or some other medium?
- If virtual meetings are taking place is the line or portal being used secure and are there any data protection issues that need addressed?
- Are there concerns around virtual meetings being recorded and is there a possibility of these recordings appearing on social media at a later date?
- Do the elected representatives have access to facilities to enable them to speak privately during consultation meetings with the employer?
- Do elected representatives have other obligations such as home schooling which will limit their availability for consultation?
- Employers must allow representatives to have "access" to employees and provide the reps with "such accommodation and other facilities as may be appropriate" - how can that be achieved if employees are less literate or have poor English, don't have access to technology, need disability related adjustments to access virtual meetings and so on?
This is not an exhaustive list but shows where difficulties could arise. Both planning and implementing the consultation may take longer than usual and employers will need to build that into projected timescales.
Are there similar issues when carrying out individual consultation remotely?
Issues relating to access to the internet and technology, covert recording of meetings, dealing with less literate employees, those who don't speak good English or those who might need disability related adjustments applies equally to individual consultation. While there is not a statutory right to be accompanied to redundancy consultation meetings it is common practice and employers should check there own procedures to see if that is provided for.
Will the special circumstances defence apply?
The special circumstances defence applies where there are circumstances which render it not reasonably practicable for the employer to comply with the requirement to collectively consult. Failing to comply includes a failure to consult in good time, a failure to consult on the required topics with a view to reaching agreement or a failure to provide the required information as well as a failure to consult entirely. The case law demonstrates that the defence applies only in very limited circumstances. The existence of the CJRS and other support for businesses available during the pandemic will make it difficult, if not impossible, to rely on the defence. It is therefore imperative that employers do as much consultation as is reasonably practicable - exactly what that is will vary from case to case.
What notice pay is the employee entitled to while on furlough?
New legislation was brought into force on 31 July to ensure that furloughed employees' notice pay is calculated by reference to their pre-pandemic full pay and not reduced furlough pay. The legislation alters the calculation of a "week's pay" as set out in the Employment Rights Act 1996. It also applies to other statutory employment rights that depend upon calculating a "week's pay" including redundancy pay, compensation for unfair dismissal, failure to provide a written statement of reasons for dismissal and failure to comply with an order for re-instatment or re-engagement, remuneration for time off to look for employment or arrange training and the assessment of whether an employee is to be taken to be on "short-time" work for a week.
How is statutory redundancy pay calculated for employees on furlough?
New legislation was brought into force on 31 July to ensure that furloughed employees' redundancy pay is calculated by reference to their pre-pandemic full pay and not reduced furlough pay. See answer above relating to notice pay for more detail.
Can I ask employees to take unpaid leave or sabbaticals instead of redundancy?
Yes, with the agreement of the employee. This option may be a short term solution for those who have caring or home schooling obligations but who would like to remain in employment.
Can I continue with furlough after the CJRS closes instead of redundancy?
The right to be furloughed is not enshrined in statute. However, it may still be possible to continue to furlough staff after the CJRS closes, just without the financial backing of the UK Government. In essence the CJRS is a form of agreed lay off which can be used without the need for a contractual lay off clause. Unless this option is rescinded, you would be free to agree what the financial terms of the furlough were with your employees and some employees may be open to the idea if it avoids redundancy. However, this is really no different to getting employees consent to lay off. Where employees agree to continue furlough without pay they may be entitled to a statutory guarantee payment as they would be for lay off or short time working (see below).
Can I lay off employees or put them on short-time working instead of redundancy?
Yes, if you have the express contractual right to do so, or the employee agrees to it. There is no time limit to lay off or short time working but employees may (after 4 consecutive weeks or a total of 6 weeks out of 13 weeks) serve written notice that they intend to claim a redundancy payment. They must still give you their contractual notice and have the necessary two years' service to qualify for the redundancy payment, and by giving you notice they would, of course, be terminating their employment.
An employer can serve counter notice stating that it reasonably expects that within 4 weeks of the employees notice being served, the employer expects working arrangements to return to normal for a period of 13 weeks.
It is important to note that holiday entitlement continues to accrue during lay off and short time working. Employees can also claim a statutory guarantee payment for up to 5 workless days in a three month period. The maximum rate of pay is currently £30 per day.
I may be able to retain some or all of my employees if I change their terms and conditions - can I do that?
Yes, with the employees' agreement you could change terms and conditions, including those relating to hours and pay. Ideally, the employees express written consent should be obtained, however if this is not forthcoming you could dismiss and then rehire on the new terms. In the 'dismiss and rehire' scenario if the employee accepts then the new terms will govern the employment relationship from that point onwards. However, dismissing and rehiring carries the risk of unfair dismissal claims and in some circumstances a claim for redundancy pay. For that reason it is important to follow a fair procedure. In some cases changing terms and conditions can trigger collective consultation requirements and advice should be sought on your particular circumstances.
What if the employee refuses to agree to the proposed changes?
Terms such as working hours and pay are fundamental to the contract of employment. Changing them without agreement will be a repudiatory breach of contract entitling the employee to resign and claim constructive dismissal. If after full consultation with the employee about why the changes are needed no agreement is reached you many need to consider whether to impose the change by way of dismissal and re-hiring on the new terms (see above). This carries the risk of unfair dismissal claims and, if the appropriate numbers are involved, may trigger collective consultation requirements.