You can still be made redundant while you’re furloughed. If you’re entitled to redundancy pay, it will be calculated using the amount you earned before you were furloughed.

Consultation during furlough:

The HMRC guidance for employers says that “your employer can still make you redundant while you’re on furlough or afterwards”. This has led people to question whether the furlough period can be used for collective consultation. Neither the employee nor employer guidance explicitly states that collective or individual redundancy consultation can be carried out during furlough or whether that would count as “work” – but on the basis that it is not making money for the employer or providing services, we believe it is possible.

Assuming collective and individual consultation are permitted during the furlough period, this is likely to be used by employers who know they need to make redundancies and are looking at using the furlough scheme to absorb part of the cost of consultation and are seeking the swiftest resolution possible. 

Starting consultation after furlough:

Some businesses are choosing to take a more risk adverse approach and just planning and awaiting the end of furlough before proposing to engaging formally on consultation when staff are back. 

This is logistically easier, but has cost implications of “wasted” weeks whilst staff are on furlough (accruing holiday) and employers are not using this period when HMRC are paying staff.  This is two fold:  consultation period and notice pay can be recovered from HMRC under the Coronavirus Job Retention Scheme (CJRS).

Collective consultation and what it looks like:

Collective consultation is required where an employer proposes to dismiss 20 or more employees “at one establishment” in a 90-day period. If fewer than 20 redundancies are anticipated, only individual consultation is required.

Collective consultation requires an employer to consult employee representatives about various matters, including ways of avoiding the dismissals, reducing the number of dismissals and mitigating their consequences.

The current circumstances present various practical challenges in terms of the consultation process, particularly where large numbers of the workforce are furloughed and so not attending work. Employers will need to think about the impact on timescales and potential creative solutions e.g. digital election of representatives, seeking volunteers and then a straightforward objection process, videocall briefings, even use of social media to enable employee reps to make contact with affected staff.  Care, at all time, needs to be taken to avoid any sensitive data breaches and GDPR compliance.

Getting the collective consultation requirements wrong can expose the employer to significant financial liabilities, including a “protective award” of up to 90 days’ pay per affected employee.

The HMRC guidance makes it clear that the ordinary redundancy principles apply (such as a genuine redundancy situation, following a fair process) during this time.

Employee entitlement:

An employer can make employees redundant at any time if there is a reduced need for their work. Clearly care needs to be taken to evidence the proposal to make dismissals “as reasonable” given the CJRS is open.

If employees are made redundant, their entitlements are as follows.

Notice pay: All employees are entitled to paid notice if they are made redundant. Their contracts will stipulate the length of the notice period. If they do not, statutory minimum notice in the UK is one week’s notice for each complete year of service up to 12 weeks.

Statutory redundancy pay: If an employee has two or more years’ service, they qualify for statutory redundancy pay. This is a formula payment of one week’s pay (capped at £538 from 6 April 2020 for each complete year of service (capped at 20 years’ service). It is then increased by 1.5 for years’ service during which the employee is aged 41 or over.  If contractual redundancy pay is more advantageous this needs to be adhered to.

Also be aware of Unfair dismissal compensation: If an employee has two or more years’ service, they can claim unfair dismissal compensation in addition to statutory redundancy pay and notice pay if the procedure by which they were made redundant is unfair. Compensation is capped at a maximum of one year’s pay or £88,519 (from 6 April 2020) if less, per person.

Other things to consider:

The desire to avoid unfair dismissal liabilities and the requirement to consult collectively mean that redundancy is not an immediate solution for employers facing the current crisis – on the one hand, any attempt immediately to lay-off employees (absent a contractual right to do so) could result in claim and on the other hand, while it is always possible to make employees redundant, it takes time to do this fairly and in compliance with the legal requirements.

Other cost reductions that employers can consider are:

terminating independent contractors, agency or casual workers who are not employees, or by not offering follow-up work to zero-hour workers;

revoking offers made to new hire employees.

requiring employees to take paid holiday during periods of self-isolation. Notice of double the relevant period of holiday is required under the Working Time Regulations although there have been instances of employers ignoring the notice requirement given the urgency of the current situation;

asking employees to agree to other changes to their contracts as an alternative to avoid a redundancy situation such as reduced pay or hours; and

offer unpaid or part paid sabbaticals to staff you wish to retain, but have limited work at this time;

giving notice to terminate any employee who has under two years’ service (and who does not therefore have sufficient service to bring a claim for redundancy pay or unfair dismissal). These employees do, however, count towards the threshold for collective redundancy consultation.