With the UK Government’s Coronavirus Job Retention Scheme (CJRS) due to end on 31 October 2020, businesses relying on the scheme to pay wages may now have to consider making redundancies.
The Insolvency Service reports that 305,427 positions were reportedly at risk of redundancy over the summer months. These figures come from HR1 Advance Notice of Redundancy forms that employers must submit to the Secretary of State if they intend to make more than 20 people redundant.
Redundancy is a potentially fair reason for dismissal. However, for a fair redundancy dismissal, it is not enough to have a genuine redundancy situation – following a fair procedure is also necessary. Depending on the number of employees made redundant, this will include either individual or collective consultation. If employers get the redundancy process wrong, they could be opening themselves up to claims worth up to 52 weeks’ gross pay. If there is a failure to collectively consult, a protective award claim may be made which sets maximum compensation at 90 days’ gross pay per employee, essentially a quarter of the annual wage bill and an expensive mistake to make.
It is important that employers start to consider the timing of any collective redundancy process now. If the employer is proposing to dismiss 20 or more employees in a 90-day period, they will need to collectively consult with representatives of those employees for at least 30 days before the first of the dismissals takes effect. This means that if you intend to make 20 to 99 employees redundant in time for the closure of the CJRS, you need to begin the collective consultation process by Thursday 1 October. If the employer is proposing to dismiss more than 100 employees in a 90-day period, they will need to collectively consult with representatives of those employees for at least 45 days before the first of the dismissals takes effect. This means that if you intend to make more than 100 employees redundant, in time for the closure of the CJRS, you need to begin the collective consultation process by Tuesday 15 September 2020.
The collective consultation period starts with a formal letter to the representatives setting out specific information to comply with the consultation legislation such as the numbers of employees affected, the potential pools and selection criteria.
Employers will also need to be mindful that they need to consult with affected employees individually too, although this can take place within the collective consultation period. Consultation should be genuine and carried out with a view to reaching agreement with the affected employees. However, actual agreement does not ultimately need to be reached. Employees should be given opportunities to suggest ways in which redundancies can be avoided, such pay cuts, reductions in hours or alternative roles. Employees should also be given the right to appeal against their dismissal.
Employers should not automatically place all furloughed employees into the pool for selection purely on the basis that they were or continue to be on furlough leave. However, the fact an employee has been furloughed may be an indication that their role is not business critical. When considering the pool, employers also need to consider employees who have been on long term sick leave, maternity leave or have caring responsibilities to ensure that there is no discrimination. Employers may also want to consider approaching employees who may be willing to volunteer for redundancy.
How can we help?
If you have questions about the redundancy process, the closure of the CJRS or any other employment matter, please get in touch with a member of our Employment team who will be happy to discuss your circumstances.