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Jun 2020

Keeping coronavirus redundancies fair and the alternatives

The Government’s coronavirus job retention scheme (CJRS) has helped many employers keep their staff. But, the winding down of the CJRS and the grim economic forecast mean that employers may need a more flexible workforce and for many sectors, redundancies seem inevitable.

Emma Thompson, employment law expert outlines alternatives to redundancy and sets out five key elements of a fair redundancy.

You should check the Government website for the latest guidance in conjunction with this article, as the guidelines on the coronavirus (COVID-19) and the Coronavirus Job Retention Scheme are changing frequently.  Speak to the Head of our Employment Team, Emma Thompson, for specific advice for your business.

Coronavirus job retention scheme extension

The CJRS runs in its current form until the end of June. From July, ‘flexible furlough’ will allow employees to work part-time and be furloughed part-time. From August until the close of the scheme on 31 October 2020, the contribution that employers can claim under the CJRS will taper off.

Alternatives to making redundancies

Although the increased flexibility in the CJRS from July will be welcomed by many, employers looking for greater flexibility to deal with reduced or unpredictable workflow, may wish to look at one of the following alternatives to redundancy:

Laying off or short-time working

Laying off staff involves sending employees home without pay for a limited period.  Short-time working means employees work less and receive less than half their usual weekly pay but may be entitled to a Guarantee Payment (capped up to £30 per day).

Both measures need an express contractual term, which should be used with care to avoid constructive unfair dismissal claims. We can advise you on introducing these terms and when layoff or short-time working trigger the right to a statutory redundancy payment.

Changes to pay, hours or duties

Other options available to employers include:

  • reducing pay;
  • reducing days or hours, including moving on to zero hours contracts; or
  • re-organising duties, for instance to move employees to areas of your business with more work.

Unless your employment contracts give you the right to do so, or you are able to reach a binding agreement with your recognised trade union, you need each employee’s consent to make these changes. Although employees may accept these more readily in the current climate, if they do not agree the changes may have to be pushed through by dismissing and offering to re-engage the employee on new terms. We can guide you through this process. We can also advise you on the risk that some changes could create an entitlement to a redundancy payment.

Changing to self-employed

Another option is offering work on a freelance, self-employed basis. This may seem attractive, but you would need to make the employees redundant first. There are a number of risks, including the impact on the fairness of the redundancy dismissals and the possibility of being caught by the IR35 tax rules. We can help you weigh up the pros and cons.

Five key elements of a fair redundancy

An employee with two years’ service can bring a claim for unfair dismissal. Where an employee with a protected characteristic argues that their redundancy was discriminatory, they can bring a claim regardless of their length of employment.

Even if the need to make redundancies is obvious, employers still need to follow a fair procedure carefully.  This will nearly always involve the following:

  • Warnings – give employees as much warning as possible. This allows the employee to inform themselves, consider alternatives to redundancy and start their job search.
  • Consult – collective consultation obligations may be triggered, as well as individual consultation. If you are using selection pools, include these in the consultation. Keep an open mind and genuinely consider the representations.
  • Criteria for selecting employees for redundancy – keep these as objective as possible and try to avoid management opinions about individual employees. Look out for discrimination issues, for example if you are using attendance as a criterion, you may need to make allowances for disability-related absences.
  • Fair selection – involve more than one manager in the scoring process, particularly if the criteria involve assessment of ability and allow employees to appeal the findings. Take on board the employees’ representations about their selection.
  • Seek alternatives to dismissal – if the CJRS or a similar scheme is available, the redundancy dismissal may only be fair if you can show that it was reasonable to dismiss despite the availability of the scheme.

We can advise you on ensuring redundancies are fair, as well as using settlement agreements to bring about changes or to swiftly bring employment to an end.

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