Redundancy after Furlough

The current furlough scheme runs until the end of April with an expected review in January. Whilst we can hope the scheme will be extended to cover the most severe lockdown periods, it is likely that it will reduce as it did in 2020 and at some point it will end.

As a business owner you should be considering the future of your business, what you plan to do, how you expect to reopen and what your team will need to look like to deliver this. Consider the different possible scenarios in terms of reopening. Will it matter to your business when and how a lockdown is lifted? Consider those scenarios and how they will be impacted by government support either continuing or not.

As an employer regardless of government schemes being available or not you are still required to comply with employment law and therefore being prepared for all scenarios will put you in the strongest position.

In an ideal world, at the point the furlough scheme ends the economy will bounce back and you will be able to bring all your employees back into work under their normal terms and conditions. However, for many businesses this will not be possible and therefore you will need to consider your options.

Lay-off and short-time working

Even if the furlough scheme ends you can continue with employees on temporary lay-off, in which guarantee pay only will apply. This can only be done without the consent of employees if you have a contractual right to do so.

Short-time working provides another option in which you can bring people back to work on reduced hours. This is useful if you have some work available but not enough to fill full time positions. As with lay-off this requires the consent of employees unless you have a contractual right.

In both cases employees may be able to claim redundancy after four consecutive weeks of either lay-off or short time working.

Further details are available in our guide to lay-off and short time working.

Redundancy

If lay-off or short-time working are not suitable for you, either because employees will not consent or going forward you do not think the situation is temporary, then you may need to consider redundancy. If it looks like you will need less people even when lock down ends then you may want to consider redundancy before or when the furlough scheme ends.

Redundancy is a dismissal with notice. Many people have a contractual notice of one month. Even without a contractual notice period, the statutory notice period is 1 week for up to 2 years service and then 1 week for each year of service up to a maximum of 12 weeks after 12 years. As a result many of your employees may have 4 or more weeks notice.

A reduction in work or closure are both reasons for dismissing someone by reason of redundancy, which is a fair reason for dismissal. However, in order for that dismissal to be deemed fair, a fair procedure must be followed.

A fair procedure requires that employees are warned that redundancy is possible. This should be happening at the early stages of the business becoming aware that this may happen. Even with the furlough scheme, if it is likely that redundancies will still be necessary once the scheme ends, then this should be communicated to employees.

Once this has been communicated, employees should be consulted and a fair selection criteria and process used. Where a selection pool is required because you are only making some rather than all redundant then you should consult with employees on the method of selection. The consultation should also consider whether there are alternatives to redundancy.

If you will be making less than 20 redundancies then individual consultation is required. There is no statutory minimum length for this, though the process must be fair as described above. When over 20 redundancy dismissals may occur then collective consultation is required, over a period of 30 days for 20-99 redundancies and 45 days for 100 or more redundancy dismissals. Specific advice should be taken when considering any redundancies to ensure the appropriate consultation is undertaken.

Time may be of the essence!

You may need to be thinking about this now.

Whilst there is no specific legal requirement over the length of time for individual redundancy consultation we would expect that in most circumstances around two weeks would be needed to demonstrate a fair procedure. When this is added to notice periods, it’s certainly not too early to be considering decisions around redundancy, particularly if the business is not in a position to pay wages after the furlough scheme ends.

Article last updated: 12 January 2021