5 May 2020

Are you an employer forced to consider redundancies as a result of COVID-19?

By Anissa Hallworth, Director and Head of Employment Services, Hayes + Storr.

The Government has put in place an unprecedented level of support measures for businesses affected by Coronavirus. However, unfortunately some employers may still need to consider other measures including redundancy.

The Government’s Coronavirus Job Retention Scheme, known as the furlough scheme has offered a lifeline to many businesses who have been able to furlough some or all of their employees and claim back 80% of their wages up to a cap of £2,500.

The furlough scheme is due to last until the end of June but may be extended. At this stage employers face the reality that all of their employees will have to be paid in full from 1st July 2020. Some employers may not be able to afford this as a result of the impact on their business from Coronavirus.

Options for employers if they cannot afford for all their employees to be paid in full from 1st July 2020

If you are an employer faced with this situation, now is a good time to act. If your only option is redundancy, you can use the furlough period to enter into consultation with employees and use the furlough period as the employee’s notice period (subject to the amount of notice the employee is entitled to).

The alternative for an employer who is forced to consider redundancy, is to wait until 1st July 2020 then pay the employee throughout the consultation process and notice period.

Redundancy

An employee is presumed to be dismissed for redundancy if the dismissal is wholly or mainly attributable to:

  • the closure of the business;
  • the closure of the workplace, or
  • change in the requirements of the business.

It is going to be fairly straightforward to establish that there has been a change in the requirement of most businesses during these difficult times.

Employees with less than two years’ service

If you need to make redundancies of employees with less than two years’ service, you can terminate their employment without following procedure or having to make a redundancy payment.  You will need to pay the employees notice pay and you can give notice during the employees furlough leave as detailed below. The reason for termination must not be connected to a protected characteristic.

Voluntary redundancy

Some Employees may wish to be made redundant and therefore it is advisable to consider this as a first option as you will avoid the need to follow procedure.

Employees with more than two years’ service

If you need to make redundancies of employees who have more than two years’ complete service, then you will need to enter into a consultation on redundancy with them. You may need to follow a selection criteria and will need to pay a redundancy payment and either pay or give notice to the employee once you have completed the procedure.

You must ensure that you follow the correct procedure when terminating employment on the grounds of redundancy as failure to do so could result in a claim against you in the Employment Tribunal which may be costly.

Lay-off and short-time working

Another possibility to consider is lay-off and short-time working or reduced days. This can be an option which you can negotiate with your employees and you may be able to enforce it depending upon the terms of your employment contract. This could enable you to retain good employees whilst also reducing your wage bill, allowing you to carry on through this difficult time.

Is the notice pay at full pay or at 80%?

The position on whether the notice pay should be paid at 80% or 100% is currently unclear. It is certain that you can recover 80% back from the Government under the furlough rules if you give the employee notice during the furlough period and the employees notice comes to an end before the furlough deadline (currently end of June 2020). However, it is questionable as to whether you need to top up the 20% for notice pay. We can advise you further depending on your individual contracts and circumstances.

As you can see, there are various options available to you and it is very important to get them right and follow procedure. If you would like further advice on how to deal with the impact of coronavirus on your business, please contact Anissa Hallworth on 01328 850726 or by email at anissa.hallworth@hayes-storr.com.

This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid ay statement which may mislead. However no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.

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