FAQs: Furloughed staff and redundancy

The Coronavirus: Job Retention Scheme is due to last until the end of June, and may be extended to some businesses/sectors beyond that date. Hopefully, we'll know more next week after the government publishes its detailed post-lockdown plan, promised at yesterday's coronavirus news conference.

Many businesses furloughed staff to avoid making immediate redundancies. If you were one of these, once the furlough scheme ends, what options do you have?

We answer some of the questions we've been asked about redundancy and furloughed employees.

1. Do you have to wait until staff return to work before you can start a redundancy consultation?

No, and there are good reasons why you may not want to wait. If you know you are going to need to reduce headcount or reorganise your business to cope with the new economic climate, the sooner you start the process the better.

If you are making 20 or more staff redundant within 90 days at one establishment, you'll need to factor in the time it will take to collectively consult with your staff because minimum periods apply before you can dismiss staff. If you're considering making between 20-99 redundancies, the minimum period of consultation is 30 days, increasing to 45 days if you're making more than 99 people redundant.

The furlough scheme is due to end on Tuesday 30 June. Therefore, if you want redundancies to take affect on Wednesday 1 July, you'll need to begin collective consultation no later than Friday 15 May if you're making 100 or more people redundant and by Monday 1 June if you're making 20-99 people redundant. However, it's best to start as soon as possible as it may take longer than normal because of the logistical difficulties of remotely consulting with representatives and individual members of staff. 

2. We don't already have elected representatives. Does this mean we don't have to collectively consult with our staff and can move straight to personal consultations?

No. If you are making 20 or more employees redundant within 90 days at one establishment, you must collectively consult with representatives. If you don't do this, anyone affected can, potentially, be awarded up to 90 days' pay (and it's not capped in these circumstances).

There is a special defence available to employers if they can show it wasn't practicable to comply with the requirements - but this is construed very narrowly and you'd have to show you took all 'reasonably practicable' steps towards complying with the requirements. 

Ordinarily, if you don't recognise a union or have elected representatives in place, you'd need to hold an election. This process can take a couple of weeks even if everyone is at work. In these extraordinary times, you may have to think creatively and do the best you can with the resources available to you. One option is to ask for volunteers and treat these as being elected without holding a formal election, or using secure social media platforms to conduct an election. If the steps you take don't comply with the formal requirements, take advice to help you decide whether the risks of doing this outweigh the benefits of speed.  

You also have to notify the Department for Business, Energy and Industrial Strategy of any proposed redundancies by letter or on form HR1. If you don't do this, you can be prosecuted and fined.

3. Can employee representatives perform their duties without breaching the 'no work' furlough conditions? 

Yes. Yesterday the government updated its employee guidance and it now expressly says that "Whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers." 

4. Can you consult with furloughed employees about proposed redundancies without breaching the 'no work' rules?

Yes. The employee guidance makes it clear that employees can't do anything which makes money, or provides services for your organisation or any organisation linked or associated with it. Consultation doesn't make money or provide services and therefore, should be okay.

5. Can you serve employees with notice to terminate their employment whilst they are furloughed?

Yes, we think so. The employee guidance doesn't specifically address this, but it does say that furloughed employees still have the same rights at work including the right to receive a redundancy payment. 

This suggests that you can time redundancy dismissals to correspond to the end of furlough.

6. How do you calculate notice pay for someone who is furloughed?

This will depend on the amount of notice they are entitled to. 

If the employee is entitled to at least one week's notice more than the statutory minimum (1 week's notice for every year worked up to a maximum of 12 weeks), they should receive their contractual rate of pay for each week. If they've agreed to a reduction in their salary as part of the furlough arrangement, that can be used for the calculation (but see later comments).

If the employee is only entitled to the statutory minimum notice or less than one week on top of this the following rules apply:

Employees with normal working hours are entitled to their usual, pre-furloughed pay provided they are:

a) ready and willing to work but no work is provided by their employer, or 

b) they are incapable of working because of sickness or injury. 

Anyone receiving SSP will fit into the later category which will include those who have been furloughed because they are shielding. However if you've furloughed someone because they are vulnerable or live with someone who is, the position is more complicated and you should take advice.

If their pay varies though (perhaps because of shift patterns etc), a week's pay is determining by averaging their pay over the previous 12 weeks - including any weeks of furloughed pay. Therefore, depending on the length of the notice period, that will very likely involve averaging out some non-furlough weeks (at 100%) and furlough weeks (at 80%).

Employees without normal working hours are entitled to be paid a week’s pay for each week of the statutory notice period provided they are: 

a) ready and willing to work but no work is provided by their employer, or 

b) they are incapable of working because of sickness or injury. 

A week's pay is determining by averaging their pay over the previous 12 weeks - including any weeks of furloughed pay as indicated above.

A note of caution ...

Paying employees less than their usual pay when under notice might expose you to claims. Most commentators think that tribunals will find a legal way to compensate employees for the shortfall if they bring claims (and there are several potential routes open to them to allow this). Plus, if you do underpay staff this will amount to a breach of contract and will invalidate any restrictive covenants the employee would otherwise have to follow. The approach you take should therefore reflect your financial situation and your appetite for risk.

7. Can you use the grant funds to pay notice?

It appears so. The employee guidance doesn't mention this at all but does expressly state that"Grants cannot be used to substitute redundancy payments"  and we would expect them to make it clear if employers can't do this. 

There's also an argument that using grant funds to pay notice is analogous to holiday pay and the government recently made it clear that employers can use furloughed grants to meet the holiday pay of individual employees.

8. What calculations should you use to work out redundancy payments?

The safest course of action is to calculate a week's pay on the employee's pre-furlough salary. However, as indicated in the answer to question 6, you may be able to base this on the furloughed salary. If you do this, it's likely to be very unpopular and your staff may bring claims in the Employment Tribunal for underpayment of a redundancy payment. 

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