Furlough and Redundancy

Despite Government support with the furlough scheme, job retention bonus and other measures for businesses, it expected that at least a quarter of UK businesses will be making some redundancies.

Importantly the usual processes and laws around redundancy have not changed, in fact, the furlough scheme places additional challenges on businesses faced with the prospect of cutting jobs.

Whilst the furlough scheme is in place (until the end of October), businesses should consider:

1. Whether all alternatives have been exhausted and whether it is fair to make someone redundant whilst the furlough scheme is in operation – businesses should weigh up their business case to determine whether financially they can afford to keep staff on the furlough scheme for as long as possible rather than enacting redundancy sooner. There is a question mark over whether serving staff with notice of redundancy whilst they are furloughed constitutes an “abuse” of the scheme that could result in any claim being repaid. Unfortunately, Government guidance doesn’t provide any information on this, only to say that employers can still make furloughed employees redundant.
2. How they will communicate with potentially affected staff – redundancy consultation processes can take place remotely with staff who are furloughed or working from home. Acas have confirmed that phone and video meetings are acceptable methods of communication however robust procedures must still be followed.
3. The fairness of pooling and selection criteria – Employees shouldn’t be chosen for redundancy just because they are furloughed, especially if they are shielding for a health reason or furloughed due to childcare responsibilities. Usual methods of pooling and selection must be used to ensure there is fairness and no discrimination.
4. That notice periods and annual leave must be paid at full contractual rate (and not the 80% furlough rate).
5. That redundancy pay should also be based on full salary, not furlough pay.
6. What employers can claim for –

a. Even where an employee has been furloughed before being made redundant, employers cannot reclaim the cost of:

• • • • statutory redundancy payments
      • contractual redundancy payments
      • payments in lieu of notice
      • untaken annual leave
      • extra compensatory payments for termination of employment.

b. Employers are likely to be able to reclaim a portion of:

• • • • the cost of notice pay for any notice period whilst on furlough
      • the cost of any annual leave taken during the notice period

Importantly, Government guidance is being reviewed on a weekly basis and as we have seen a number of times during the last few months, things change.

This means it is important for businesses to keep matters under close review.