The End Of Furlough – Why Businesses Should Plan Ahead For Redundancies

With the Coronavirus Job Retention Scheme (CJRS) (also referred to as the furlough scheme) set to end on 30th September, waves of redundancies are forecast to take place over the coming weeks and months – meaning it is vital that businesses start planning ahead and thinking carefully about their future.

The CJRS was introduced as part of a package of measures to safeguard jobs and alleviate the impact of Covid-19 on businesses across the country and, since then, 11.6 million jobs have been supported across the UK. However, since 1st July 2021, employers had to start contributing ten per cent of an employee’s wage under the scheme, which was then increased to 20% at the start of August.

Redundancies as a result of Covid-19 and the end of the furlough scheme

Faced with uncertain trading times for many businesses and now partial financial responsibility for all employees, many employers will need to review their workforce and requirements to consider whether current levels of staffing are sustainable.

If an employer intends to make more than 20 people redundant, this triggers collective consultation requirements, including minimum consultation periods during which redundancy dismissals cannot take effect. The consultation period for employers who anticipate making 100 or more people redundant is 45 days and for those anticipating making between 20 and 99 redundancies, it is 30.

For employers who are concerned about the changes to the furlough scheme, they need to think carefully about whether they want to commence redundancy consultations now so that they are in a position to make redundancies before the Government funding reduces – rather than waiting until that point to start consultation and being faced with employment costs during the consultation period.

That being said, employers should also be mindful of making employees redundant before the CJRS ends in September when they can instead be furloughed. If an employee is dismissed when it is a reasonable expectation for them to be placed on furlough then the employee may be able to bring an unfair dismissal claim. In the recent case of Mhindurwa v Lovingangels Care, the Employment Judge found that an employer had a duty to consider furlough when making one of their employees redundant in May 2020, and due to the absence of a reasonable explanation for not furloughing the employee, the dismissal was unfair. The Judge ruled that although the employer had no work for the employee when they were dismissed, it did not know if this was going to change in the future and didn’t consider whether the employee should be furloughed for a period of time to see if any other work became available.

As well as complying with the requirements of collective consultations (which include liaising with recognised trade unions or elected employee representatives), employers that are making any number of employees with more than two years’ continuous service redundant will need to adhere to minimum requirements in terms of consultation and meetings.

All of the above makes planning ahead extremely important for businesses!

What is redundancy?

When someone is made redundant, it’s because there is no longer a business need for the work they are doing, and their role no longer exists. Employers aren’t able to fire someone because priorities have changed or the company is having a tough time financially – they have to go through a step by step redundancy process and ensure the process has been handled in a way that’s fair, considerate and respectful.

What is non-compulsory redundancy?

This is where employers ask their employees if they would like to volunteer for redundancy. This may be an attractive option for some people and helps employers protect employees who are more dependent on their job. If, after this process, a business still needs to let some people go, they would then move onto compulsory redundancy.

What am I legally required to do when making redundancies?

The legal obligations on any employer contemplating redundancies depend on the number of staff that they envisage letting go of. If you anticipate that you will have to make 20 or more people redundant at the same location within a set period, you will have a legal obligation to consult with employee representatives (these could be trade union representatives or colleagues elected for this purpose).

Regardless of the numbers, you should also follow a fair process where you meet with employees that are at risk of redundancy and listen to any suggestions the employees have for avoiding redundancies.

If only a number of employees are going to be made redundant, you should explain how you are going to score the employees and what criteria you will use. Employees that are selected for redundancy are entitled to be given their contractual notice or a payment in lieu.

How should I consult with my employees?

You should consult properly with those at risk of redundancy before reaching a final decision. This will usually mean holding meetings with employees to discuss the situation in more detail. At the end of the consultation period, you will need to confirm who you are making redundant and whether an alternative to redundancy for certain roles has been found.

Do I need to offer employees at risk of redundancy alternative jobs? 

During the consultation period and at any time before the dismissal takes effect, you are obliged to consider employees at risk for any suitable alternative vacancies that become available in the business or in any associated companies. Any employee on maternity leave or shared parental leave has the right to be offered any suitable alternative employment first.

Otherwise, if you have more than one other potentially redundant employee interested in an alternative role, you can undertake a competitive interview process to decide who to offer the role to.

redundancies furloughHow Nelsons can help

Laura Kearsley is a Partner in our expert Employment Law team.

If you would like any advice concerning the subjects discussed in this article, please contact Laura or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.