Redundancies after furlough - expert advice for tough times

In response to the adverse economic conditions arising from the coronavirus outbreak, the government announced the Coronavirus Job Retention Scheme on 20 March.  The aim of this Scheme was to avoid redundancies, if possible, by alleviating the pressure on employers to continue paying employees’ wages in full during the crisis period.  For some employers this Scheme has achieved this aim however for others it has become known as the redundancy deferral scheme. 

Some employers have steadily been making redundancies since the introduction of the Scheme however a significant number of employers using the Scheme have decided to wait until they have more certainty about the future of their business and/or have fully utilised the Scheme before making any decisions on rightsizing.

There have been a number of changes to the Scheme, the most significant being made on 29 May confirming the Scheme would close on 31 October.  With this announcement being made as early as May employers have been provided with sufficient time to review their business and consider whether their current level of staffing will be sustainable when the government’s financial assistance will no longer be available.  Since the pandemic be employers have had to make some tough decisions over the last few months which undoubtedly will continue to be made in the coming weeks as the Scheme nears its end.

With this in mind if employers are planning to make largescale redundancies when the Scheme closes then the redundancy process should have commenced in some cases as early as mid-September to ensure a fair process. It is imperative that employers vigorously adhere to fair redundancy procedures at this stage as the alternative may result in having to invest significant sums of money and time in defending employment tribunal claims.  In the last recession it was reported that there had been a significant increase in the number of claims for unfair dismissal and breach of contract as a result of redundancies made at the time.  There is a strong possibility this may happen again.  Due to the current economic situation redundant employees are likely to find it difficult to readily secure alternative employment and this may make them more likely to actively pursue claims.

Redundancy should be a last resort. It can be one of the most distressing events an employee can experience. It requires sensitive handling by an employer to ensure fair treatment of redundant employees as well as the productivity and morale of the remaining workforce. Redundancy legislation and case law is complex, and an employer must understand its obligations, including employees' rights and the correct procedures to follow.

A redundancy dismissal will be unfair if an employer has not acted reasonably in all the circumstances and followed a fair procedure.  In order to successfully defend a claim for unfair dismissal on the grounds of redundancy an employer should ensure:

A fair reason for dismissal

An employee can only be dismissed by reason of redundancy if there is a redundancy situation as defined by statute. If an employer cannot show this, the dismissal will be unfair. 

Taking reasonable steps to avoid or minimise compulsory redundancies

An employer will be expected to have considered alternatives which could mitigate the need to make compulsory redundancies.  Examples of alternatives to redundancy include furloughing, natural wastage, offering existing employees sabbaticals and secondments, pay freezes, short time working, lay off, unpaid leave and temporary reduction in wages.  An employer needs to be careful when imposing alternatives as it may not be able to adopt these without breaking an employee’s contract.  An employer must agree any contractual changes with an employee and it is advisable to confirm the agreement in writing.

Another way to avoid making compulsory redundancies is to request volunteers.  An employer is not obliged to accept volunteers and must make it clear at the outset that the needs of the business are the priority and can reject an application on this basis. 

Prior notice and engaging in a fair consultation process

An Employer must initially warn employees of the possibility of redundancies and inform them that their role is at risk of redundancy.  This notification will trigger the consultation process during which an employer will discuss with affected employees ways of avoiding redundancies and mitigating their effect.

As well as carrying out individual consultation with each employee, if an employer is proposing 20 or more redundancies at one establishment within a 90-day period, collective consultations with recognised trade unions or elected representatives must start within minimum time scales. For dismissals of 100 or more employees, collective consultation should begin at least 45 days before the notification of redundancies. For dismissals of 20-99 employees, it’s at least 30 days before the notification of redundancies.

An employee is entitled to be accompanied at all individual consultation meetings by a trade union representative or a work colleague.

There is a possibility that some businesses that will not survive the extreme downturn in business, and redundancies will be an inevitable consequence. In these circumstances an employer should still carry out some form of consultation rather than rely on the exceptional circumstance defence which can be difficult to establish.

Fairly selecting employees for redundancy

An employer will need to decide on a redundancy selection pool. This involves giving consideration to pooling all those employees performing the same or similar roles.

Once the selection pool has been identified, an employer must apply a fair and objective selection criteria to determine which employees should be made redundant. The selection criteria must be applied fairly. Care must be taken to avoid any criteria that are potentially discriminatory on the grounds of race, sex, disability and age.

Taking reasonable steps to find a suitable alternative position for the employee within the company or the group of companies.

An employer should satisfy itself that there is no alternative employment available before deciding to dismiss an employee for redundancy. A redundancy is likely to be unfair if an employer does not look for suitable alternative employment for the redundant employee within the company and/or group. An employer has no obligation to create vacancies nor to offer alternative employment if a vacancy exists but failure to explore redeployment opportunities may render the dismissal procedurally unfair.  

An employee who accepts an offer of suitable alternative employment is not entitled to a statutory redundancy payment.  An employee who unreasonably refuses an offer of suitable alternative employment is also not entitled to a statutory redundancy payment

Only after consultation has been concluded on all the points raised above may the employer give notice of termination.  This notice must be confirmed in writing. 

Under statute an employer does not need to provide the employee with a right of appeal but it is good practice and fair to do so.  This right must be provided if an employer’s redundancy process includes a right of appeal.  If there are concerns with the dismissal process than an appeal will allow the employer to remedy the defect thus making any dismissal fair.

As you can see making an employee redundant is a complex process which is made even more difficult when dealing with the distress it can cause to an employee.  Mistakes can easily be made which if challenged in a tribunal can lead to a finding of unfair dismissal.

If you are considering making redundancies and are unsure about the process and require advice and assistance please contact our Talbots Employment Team on 0800 118 1500 to find out how we can help or email Reyhana Koser.