29th April 2020

What next? Points employers should consider before making redundancies

As we begin the month of May, it is perhaps a quieter, calmer month from an employment law perspective compared to that of March and April. In early March, most businesses were continuing to function without much thought of the virus but only 2 weeks later the UK was, effectively, under lockdown due to COVID-19. Some sectors shut down, and most other businesses have felt the impact.

Business leaders had to grapple with the new term ‘furlough’ and constantly changing guidance, with some uncertainties still lingering.

During the next few weeks and months, many businesses will be facing difficult decisions on what happens next.

Set out below are some of the questions businesses should be considering.

What will the business look like?

This is a question that is facing most businesses, no matter what industry they are in. It is an important starting point, as everything will flow from this – what will they do next and, for example, will there be a need for redundancies going forward.

It may be that parts of the business can continue as normal or may even be more in demand, while other parts may, sadly, no longer be viable.

Having as clear a picture as possible about what the business may look like will help with a business plan for what it may need to do next.

What does the business need?

Once an overall picture of the business has been decided, the business will turn to what does it need in terms of human resources, i.e. its staff. The structure going forward will need to be considered carefully and, with that, the roles that will then be required in the reorganisation. It may be that dramatic restructures and reorganisations are not required, but instead simply a streamlining of roles, or perhaps particular parts of the business are affected while others are not.

Informing and consultation requirements

Before decisions are made it is important for a business to consider its statutory requirements for any information and consultation process that it must follow. Where over 20 or more employees may be being made redundant, it may trigger statutory collective consultation requirements which would require the business to consult with representatives of the affected employees and also notify the Department for Business, Energy & Industrial Strategy (BEIS).

Whether a business is facing large-scale redundancies or smaller reorganisations, it is advisable to seek advice early on to ensure it follows a fair process in order to avoid claims in the employment tribunal. Following a fair and open process will also help promote good staff morale in these challenging times.

It is important for businesses to remember to inform and consult with all staff and not to forget or discriminate against those on leave, for example those on maternity leave, sick leave or furlough leave.

As part of any redundancy process there may inevitably be selection criteria that needs to be considered and applied fairly to those members of staff that are affected. Objective criteria will help to ensure that a fair process is followed.

Furlough leave and a redundancy process

There are, unsurprisingly, questions over the relationship between furlough leave and a redundancy process, especially as this can involve lengthy consultation and notice periods.

The original intention behind the Coronavirus Job Retention Scheme (CJRS) was to avoid businesses having to make employees redundant but the recent Direction highlights at paragraph 2.1 that it is to “provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease.” The employee guidance also states that employees on furlough leave can be made redundant. However, the reimbursement cannot be used to pay redundancy payments.

It would appear that employers are able to consult with staff on furlough leave and also serve them with notice, whether due to redundancy or some other reason. It is, however, worth keeping an eye out for updates in this area and to seek advice with regard to any redundancy process going forward. Please do contact Linda Wilson at lsw@macdonaldoates.co.uk if you have any queries.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.