Furlough is not the first step in the redundancy process!
The Government announced last week that the lockdown restrictions in the UK will continue for “at least” another three weeks as it tackles the Coronavirus outbreak. The day after this announcement, the Government confirmed that the Coronavirus Job Retention Scheme will continue until the end of June 2020.
This scheme extension is clearly really good news but we’re getting an increasing number of enquiries from businesses who are starting to think “What next?”
Whilst the CJRS can’t be praised highly enough in terms of what it is doing to support employees, many employers are starting to worry about what lies ahead. The scheme will come to an end and is likely to do so abruptly.
At that point, all employees are back on payroll and it becomes the responsibility of the employer to have enough cash to pay them.
- If your business has been shut, you’re going to have had no income so that could be difficult.
- If your business is one that provides services to a sector that has been shut, then there is going to be a delay between your clients starting to operate again and them starting to spend money with you.
Without wanting to sound too pessimistic, there are definitely difficult times ahead.
The purpose of this post is to provide you with options, so that you are prepared for the end of the Coronavirus Job Retention Scheme and the return of your employees from their furlough leave.
The options we consider are:
As with all of the guidance with coronavirus, we need to remind you that these are unprecedented times and it is unclear as to how employment law will be applied in these exceptional circumstances.
The information that follows has been compiled with input from government websites, Acas and HMRC (the only official resources that we’re happy to use as these are the institutions who will be responsible for enforcing the rules as we move forward), but the reality is no-one really knows for certain how actions that businesses need to take now will be interpreted later.
1. Lay off and Short-time working
At the start of all of this, before the CJRS was announced, employers were considering short-time working and lay-off where this was permitted under employment contracts. This will still be an option that employers can explore.
If you find your business in a position where it needs to phase the return of employees then you could look to make use of these clauses. If your employment contract has a layoff / short time working clause, you will be able to exercise this clause by simply confirming to the employee the actions that you are taking and why.
If you don’t have these clauses then you’re going to need to negotiate with employees if you want to alter their salary, working hours or lay them off completely.
2. Redeploying staff
Employers may need to consider if there is an opportunity to offer employees alternative employment. Maybe you have less of one type of work but more of another.
Again, employment law will still be applicable therefore, you will need to negotiate this option with the employee and receive their consent to make such change. Also, be aware that if there are many employees who you wish to redeploy, you may need to conduct a collective consultation with all affected employees, in addition to individual negotiations.
3. Sabbaticals
Employers may wish to consult with staff about the possibility of taking sabbaticals or simply invite staff to apply for sabbaticals.
Some staff may be happy to take a sabbatical, particularly if they are having to look after their dependants during this period.
A sabbatical could be on either an unpaid or a part-pay basis for a defined period of time.
4. Redundancy
It may simply be that redundancies are unavoidable and, as difficult as this may be, the quicker you face into this challenge the better for your business, although sadly not for your employees.
This is a very difficult and emotive subject. Making employees redundant is never easy and it’s not an action that a business owner wants to take. Doing so when the world is so uncertain makes it even harder and we are not saying that any of this is easy.
However, you need to be mindful of the fact that, if you do end up needing to reduce headcount, in the short-term, there can be a big cash requirement. You are going to need to pay any employee that you do make redundant their redundancy pay if they are entitled, any accrued holiday pay and their notice. This could be quite a bill at a time when your business is very low on cash.
If you do think that you may need to have fewer people coming out of this crisis than you had going into it then there are some key things that you need to remember:
- Your redundancy process is entirely separate to your furlough process. Just because someone has been placed on furlough it does not mean that they are the first target for any redundancy programme. Your selection criteria must still be entirely fair and applied consistently to all relevant employees.
- It could be that you’ve done one or two redundancies in the past and you think you know what you’re doing. Just remember that, if you are going to make more than 20 people redundant at a single site within a 30-day period then your process needs to be entirely different. You will need to undertake collective consultation with elected employee reps, you’ll have minimum periods of consultation to which you need to adhere, and you’ll need to complete a submission to The Redundancy Payments Service.
Redundancy is a complex legal process that you need to get right. This is an area where we really do encourage you to get professional guidance (preferably from us!).
5. The Government may extend the scheme
Of course, it’s possible that there’ll be a further extension to the CJRS or perhaps some sort of phased withdrawal of the scheme but there’s no certainty around that. As much as these decisions are difficult, putting them off is unlikely to be the right thing to do.
Employment laws still apply
When making changes to working hours or other terms and conditions, assuming your employment contract does not already allow for that, normal employment law applies – refer to our post on employment law: Job Retention Scheme – Employment Laws Still Apply.
Also, the employer must be careful not to discriminate in deciding who to offer furlough too – refer to our post on furlough discrimination: Furlough Decisions – Beware of Unintended Discrimination.
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