Employers never wish to be in the position of considering redundancy however with the pandemic having unprecedented economic impact across the globe it may be a reality that many will need to face. And while redundancy in itself is process that needs to be carefully navigated, the covid-19 crisis presents its own pitfalls.

So how does Covid-19 effect redundancies?

On 20^th March 2020 the UK Government launched the Coronavirus Job Retention Scheme – or “furlough scheme” – to shield businesses from the economic impact of lockdown and reduced trade. This allowed employees to be furloughed with no cost to the employer until 31^st July 2020 and with only a small percentage of costs suffered thereafter.

While some businesses have been able to resume near-normal operations and remove their workforce from furlough, others still rely on the government scheme to protect jobs and their employees while either unable to trade or while suffering a reduction in trade.

Surely redundancies will come from the pool of furloughed employees?

 

This is important – not necessarily. Simply selecting furloughed employees for redundancy for no other reason than they are furloughed could expose the employer to an “unfair dismissal” tribunal. Being furloughed cannot be the only criteria.

Furloughed staff are protected by employment law and retain full employment rights. Employers must therefore be careful to ensure that selection pools and criteria are fair, objective and reasonable.

Some staff may be furloughed due to caring responsibilities or may be shielding for health reasons and using this as a basis for redundancy is likely to constitute indirect discrimination.

There may also be an argument that effecting redundancies where staff could have remained on furlough could be deemed “unfair”. This is certainly not a cast iron certainty however employers should consider the possible existence of this grey area when contemplating initiating redundancy procedures.

Assuming I comply with the above, what are the possible costs?

Redundancy entitlement remains unchanged. Employees with two years’ continuous service are entitled to statutory redundancy payments based on a multiplier of:

• Half a week’s pay for each year of employment up to the age of 22;

• One week’s pay for each year between the ages of 22 and 40;

• One and a half week’s pay for each year over the age of 41

There is a maximum of 20 years’ service which can be taken into account and a statutory maximum limit on the week’s pay currently set at £538 per week.

Employees’ notice periods still apply even when on furlough and are payable at their usual rate of pay, not the furloughed amount.

We would always recommend speaking to us or your dedicated HR professional if you feel redundancies may be required in your business.

Full guidance can be found here:

https://www.cipd.co.uk/knowledge/fundamentals/emp-law/redundancy/coronavirus-guide