Furlough and Redundancy…What You Need to Know

The Coronavirus Job Retention Scheme, known colloquially as the ‘furlough leave’ scheme, will end on 30th September 2021. The scheme, which has been in place since March 2020, has been extensively used by employers throughout the UK; as of 14th July 2021, approximately 11.6 million jobs from 1.3 million different employers were furloughed. By the end of the scheme, it is estimated that the UK government will have spent up to £80 billion on payments. The latest available data shows that 1.9 million workers were still on furlough at the end of June. The Institute for Employment Studies is reporting that many employees on furlough may face redundancy at the end of the scheme. An employer contemplating redundancies would need to consider the following:

1.     Is it a genuine redundancy situation?

Section 139(1) of the Employment Rights Act 1996 confirms that a genuine redundancy situation exists if the employer:

·         Is closing the business for which the employee was employed; or

·         Is closing the specific location at which the employee was employed to work; or

·         No longer needs the employee’s role to be carried out; or

·         Needs fewer people to carry out work of a particular kind

It goes without saying that ‘redundancy’ should not be used as an excuse to dismiss an employee who has bad performance or a poor attendance record or who has committed misconduct.

2.     Warn the employees of the potential redundancies

An employer is required to explain the reason for the redundancy situation and the potential impact that this will have on the affected employee/s.

3.     Create and apply a fair selection pool (and non-discriminatory scoring criteria)

If an employer is closing a business, or only removing one role (or one specific role) from the business organisation, there will generally be little need to select which employee is to be made redundant. However, if the employer is reducing the number of employees it requires, the employer will need to be able to justify which employee is subsequently selected for redundancy. Possible selection criteria can include such things as the employee’s performance (if supported by objective data) and/or their disciplinary records etc.

4.     Consult with employees

If more than 20 employees are to be made redundant within 90 days, an employer’s consultation obligations are more specific and require the appointment of employee representatives with whom the employer should consult. If there are fewer than 20 employees, the employer should consult and meet with the employees directly, explaining why they have been selected for redundancy.

5.     Explore suitable alternative employment options.

Just because an employee has been selected to be made redundant does not mean that the employee should be made redundant. The employer should then consider whether there are any suitable alternative roles available for the employee within the business, taking in to account the skills, experience, and current terms and conditions of the employee.

6.   Dismissal

If, after following the above and exploring all the options, there are no suitable alternatives, an employer can take steps to dismiss the employee. The employer can invite the affected employee to another meeting and clearly explain the decision. The employer should then write to the employee to confirm the dismissal, clearly stating their termination date. An employer should also generally offer the employee a right of appeal.

An employee who will have two years’ service by the termination date and who is working their notice for redundancy is entitled to reasonable time off to look for another job.

7.    Redundancy Payments

An employer can either have the employee serve their period of notice, or pay the employee in lieu of them working it. The employee should also receive payment for any accrued but untaken holiday entitlement.

An employee has the right to statutory redundancy pay if they have been employed for two years or more. This amount is based on their age and length of service, at a maximum of £544.00 per week for 30 weeks. The maximum statutory redundancy pay an employee can currently receive is £16,320.00.

Some employers offer an enhanced redundancy payment under what is known as a Settlement Agreement. A Settlement Agreement confirms that the employee waives their rights to bring any claim against their employer for any alleged breach of their employment rights, usually in exchange for some enhanced payment. For a Settlement Agreement to be valid and binding, an employee must take legal advice on its terms, something on which Franklins Solicitors LLP can advise you upon.

If you are an employer considering making redundancies, or an employee who has been made redundant or is being offered a Settlement Agreement please contact Ben Stanton on 01908 660966 / 01604 828282 or by emailing ben.stanton@franklins-sols.co.uk.