Guide to redundancy procedures during the Covid-19 pandemic – Part 1: Schemes and their effects

The coronavirus (Covid-19) pandemic poses a significant threat to people’s health and wellbeing, as well as huge disruption to businesses. People professionals will need to rapidly adapt their practices and procedures to suit the current situation but also to ensure their business continuity and viability.

Part of this response may unfortunately have to include redundancies or other cost cutting measures. The nature of the virus will mean that employers may need to consider adapting their usual redundancy procedures, taking into account the Job Retention Scheme (known as furlough) and the new Job Support Scheme that replaces the furlough scheme.

This post is the first in a series setting out the detailed guidance from the Chartered Institute of Personnel and Development (CIPD) on how these schemes affect redundancy procedures.

The Coronavirus Job Retention Scheme and redundancy procedures

In March 2020, the UK Government announced the implementation of the Coronavirus Job Retention Scheme, to help businesses deal with the economic consequences of the Covid-19 pandemic and consequent lockdown measures. Details of the scheme are set out in HMRC Guidance Notes (for both employers and employees), a Treasury Direction, and periodic updates. The scheme aimed to help employers whose operations have been severely affected by coronavirus until it ends on 31 October.

The scheme allowed organisations to “furlough” employees, i.e. place them on a temporary leave of absence. Under the first phase of the scheme (which concluded at the end of June 2020), employers could reclaim up to 80% of furloughed staff wage costs from HMRC, subject to a cap of £2,500 per month.

Partial furlough

A further flexible phase of the scheme has been operational between 1 July and 31 October. During this phase employees can be partially furloughed, combined with part-time working. Employers need to pay for any working time but can still claim a grant for periods of furlough, subject to certain conditions. Employers need to pay employees’ National Insurance and pension contributions from August onwards and contribute 10% and 20% towards furlough pay in September and October respectively.

Employees had to agree to being furloughed (and to any decrease in salary). They also had to be furloughed for a minimum of three weeks, and could not carry out any work for their employer during the first phase of the scheme. However, after 1 July any pattern of working could be agreed and any furlough periods can be claimed for in blocks of at least one week.

Additional considerations for employers

The usual rules around redundancy have not been changed. However, while the furlough scheme is in place (until the end of October 2020) and other government assistance is available, there are some additional considerations to be borne in mind. For example:

  • Logistical issues will need to be overcome if redundancy consultation processes take place remotely with staff who are furloughed.
  • Organisations will have to think carefully about ensuring that redundancy pooling and selection criteria are fair. In particular, if an organisation is proposing to select staff for redundancy based purely on the fact that they are furloughed, there is a risk that this approach may give rise to an unfair or even discriminatory redundancy process and/or dismissals. The extent of the risk will depend on the reasons for staff having been placed on furlough in the first place, and the selection process that was used to do this.
  • Staff are entitled to be paid their full salary during their notice period, even if they have only been receiving the relevant percentage of furlough pay during furlough – although this depends on whether the notice period is contractual or statutory. Redundancy pay should be based on full salary, not furlough pay. Any outstanding annual leave should also be paid at the full rate of pay.
  • Redundancy dismissals may count as unfair dismissals if they take place in circumstances where an employer did not properly consider alternatives. Such alternatives include retaining the employee on furlough or the Job Support Scheme if possible, and the Job Retention Bonus explained below.

Job Retention Bonus

The duty to explore all alternatives (part of the overall duty to seek to avoid redundancies altogether) includes taking into account the Job Retention Bonus of £1,000, which the government is offering to UK employers for every furloughed employee who remains continuously employed until the end of January 2021. This is a one-off payment to encourage firms to retain formally furloughed workers.

An important point to bear in mind is that new government guidance is being published and updated on a regular basis. This means it is important for businesses to keep matters under close review, and always read the latest guidance before beginning any processes.

My next post in this series will explore a range of possible redundancy situations and the ins and outs of redundancy consultations.

If you would like further information in the meantime, email me or call me on 020 7099 2621.