Redundancy is a form of dismissal from employment, occurring when employers need to reduce their workforce. Redundancy should always be a last resort and employers must always demonstrate that they made attempts to avoid redundancies.
To make employees redundant, an employer must demonstrate that their jobs will no longer exist, because they require fewer (or no) workers to do work of a specific kind at a particular location.
Redundancies can be an extremely stressful experience. To ensure the process is fair, employees have strict rights under redundancy, including specific rights if their employer is insolvent.
There are strict rules that employers making redundancies must follow, to ensure that the process is fair for employees. Where employers fail to follow the legal procedure in making redundancies, such as by failing to consider alternative measures, or not using a fair selection process, they may be liable for unfair dismissal claims or protective awards.
These can include:
There are a number of resources available to support employers who are making redundancies, from the Department of Work and Pensions through Jobcentre Plus, Local Authorities and organisations such as the Chartered Institute of Personnel and Development and Acas.
This briefing paper includes detail on all these sources of support and how employers can utilise them. It also outlines further support available through the Chambers.
Employers should always take steps to avoid redundancies before dismissing staff.
Where employees are currently furloughed, the Coronavirus Job Retention Scheme will continue to support their employment by paying a percentage of their wages until 31st October 2020 (click here for further details). This may help your business avoid redundancies in the short term. However, the deadline has passed for businesses to (re-)furlough new staff under the scheme.
You cannot furlough employees that started working for your organisation after the 19th March 2020.
Dependent on employment contracts and employee agreement, other steps to avoid redundancies may include:
Before making compulsory redundancies, employers should also seek applicants for voluntary redundancy or early retirement (subject to compliance with age discrimination law)
You can make furloughed employees redundant, however you will need to make sure that the selection process is still fair, and consider whether it would be (financially) reasonable to make those who could remain furloughed redundant at this time.
You will still need to follow the usual procedure, including in regards to consultations. In the current circumstances, consultations can be conducted remotely, so long as all employees affected have the necessary technology and capabilities to still participate fully.
Employees – even where on furlough under the CJRS – are entitled to notice payments on the basis of their full salary. Similarly, redundancy pay must be based on their full salary, as opposed to the relevant percentage of their pay they have received during furlough. (click here) Any outstanding annual leave should also be paid at the full rate of pay.
If your business would become insolvent as a result of making statutory redundancy payments, the Insolvency Service’s Redundancy Payments Service (RPS) may be able to help:
The Greater Birmingham Chambers of Commerce recognises that though unfortunate, redundancies can sometimes be the only means by which a business can continue to operate responsibly, and continue to provide jobs for remaining staff.
Sadly, it is expected that many employers and employees will experience redundancies as a result of the economic impact of the Coronavirus pandemic and subsequent lockdown measures: in Q2 of 2020, 29% of Greater Birmingham businesses already noted a reduction in the size of their workforce.
The ongoing pandemic is already creating a stressful environment, impacting personal wellbeing, and announcing redundancies in businesses will further affect moral and productivity.
For the purpose of transparency and ensuring staff are aware of their rights, every employer who can, should consider implementing a formal redundancy procedure.
Whether a formal redundancy procedure is in place or not, employers should place great importance on handling the situation fairly and sensitively for those who are losing their jobs. They should also aim to be as transparent as they reasonably can with all staff during the redundancies process, to reduce anxiety where possible and, after redundancies are made, take steps to ensure that remaining employees have some assurance as to their job security.
As the CJRS (or ‘furloughing’) is wound down, the severity of this crisis means we need to see policymakers go further than the measures to protect, create and help people find jobs announced in the Chancellor’s Summer Statement. Among further measures, the GBCC would like to see jobs protected further through increasing the Employment Allowance for SMEs from £4,000 to £20,000 for an initial 18 month period and increasing the threshold for National Insurance contributions from £8,788 to £12,500.
The Chamber’s Unprecedented Times report, combining an in-depth analysis of data on local business performance throughout the lockdown and policy recommendations (click here) suggests a multitude of further measures to stimulate consumer and business confidence, help employers avoid or minimise redundancies, and put the UK economy on a path to sustained recovery.
Has your business been impacted by Coronavirus? Contact your relationship manager or submit a message below: