Redundancy and the Furlough Scheme How Are Redundancies Affected By The Furlough Scheme?
Right now, businesses throughout the UK are adjusting to their “new normal”. For many this means changing the nature of their relationships with their employees or even their customers. This includes reduced working hours, reducing operating costs, alternative and remote working options and even redundancies.
Businesses throughout the country have been utilising the government’s furlough scheme. This has enabled many businesses to negotiate these trying last few months. However, with the furlough scheme coming to an end in the next few months, you’re likely wondering where this leaves you.
Everything You Need To Know
The ELAS Group recently hosted a webinar where we dealt with many of the issues around the furlough scheme and how it will
affect any potential redundancies that you may need to make in your business. Below you’ll find a selection of the topics addressed during the webinar.
However, please remember that this is just advisory and may not be relevant to your exact situation. Before acting in any way, you should always seek
advice from an employment law specialist who can help you with the exact issues you’re facing! Is there a legal requirement to contribute to the furlough payment to employees on furlough?
Yes, from 1
st August 2020 the scheme will start to taper down from then until it ceases on 31 st October 2020, with the grant no longer being available for the full 80%. However, employers will still be liable for 80% of the furloughed employees’ salary. From August 2020, employers will have to contribute the employers NI contributions and the employers pension contributions. From September 2020, additionally, employers will need to contribute 10% of the 80% pay, and from October 2020, employers will need to contribute 20% of the 80%. When the furlough scheme reduces to 70% in September 2020, does the employer have to top up by 10%?
Yes, you need to contribute so that the employee still receives 80% pay for any time spent on furlough.
How does the furlough scheme affect staff on zero hour contracts?
Zero-hours workers have been eligible for the furlough scheme since the outset. Redundancy still applies to zero-hours workers. You would be required to undertake the
same consultation process as you would with your other employees. If my staff still work 5 days, but fewer hours, can they get furlough pay for the lost hours?
No, they will still get furlough pay for the hours that they don’t work. You would need to calculate the contracted hours they would normally work per week; deduct the hours they work, and the remaining hours would then be paid at 80% of their normal pay. You will need to ask the staff to complete a flexible furlough agreement to replace any current agreement to make sure that this is being done properly.
One calculator suggests furlough was worked out by dividing by days worked normally. Does this mean anyone on short hours across their normal days would not be eligible for furlough for the remaining hours?
This is a little tricky to answer generally and it may be that we have to consider the individual circumstances to provide full advice. If an employee normally works 40 hours each week, for example, and as part of the flexible furlough scheme they only worked 20 hours a week, then they would be eligible for furlough pay for the 20 hours they do not work. If an employee does not have normal working hours, then you would work out how many hours per week they work on average to decide if they are eligible for furlough pay for hours not worked.
What happens if an employee was on SSP for 6 months, which ended after the furlough deadline? They weren’t enrolled onto the furlough scheme and there is no work for them.
If they are the only person employed within that role, then you would be able to consult with them on the possibility of redundancy, and alternative roles. However, if more than one person is employed within that role, they would need to be pooled, selected and consulted fairly as per the procedure advised during the webinar.
Staff have been informed by email that they may need to work reduced hours when furlough ends to avoid redundancies. Do they have to accept reduced hours?
No, your employees do not have to accept reduced hours. If they don’t then you would need to consider redundancy. Please note that sending an email is not sufficient procedurally to allow you to make these changes. You would need to undertake a consultation which we can advise on in more detail for you. You can also
consider the option of short time working or lay-offs, but these should only be used if you anticipate the reduction in work will be temporary. If you think it will be long lasting, these options are not appropriate. How does the finance of the flexible furlough work?
Via the HMRC portal in the same way as ordinary furlough –
https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme Staff who haven’t been furloughed are working reduced hours. If they’re moved onto flexible furlough, do you claim all non-working days for the hours, or would it be less the reduced hours to be in line with all other staff?
If the reduced hours was a permanent change, rather than something like short time working, then any flexible furlough would only make up the difference between the hours they work and their current total hours, which would be the reduced number. To take full advantage of flexible furlough, it is best to increase your employee’s hours back to their original level and then flexibly furlough them.
What are the options if an employee refuses flexible furlough?
You can ask staff to work if they are on furlough. Your original furlough agreement with them should have provided for circumstances where the agreement ends. This should include when you require them to return to work. However, you should firstly explore the reasons for their refusal. It may be possible to take
formal disciplinary action in response to a refusal. However, we can advise on specific cases for you to ensure that any such action is correct and reasonable. What happens if an employee was due to retire, and is now holding on for furlough payments and/or possible redundancy?
If they’ve already given retirement notice, then you can work towards that date and nothing needs to change. If they haven’t, then they would stay employed until they decide to retire or
until you dismiss them. There is no retirement age so you cannot push an employee to retire. This would constitute a dismissal which would be unfair and probably discriminatory. When considering redundancy for someone who is currently furloughed, would they have a normal redundancy calculation rather than at the furlough 80% rate?
Yes, that is correct. The entitlement to a redundancy payment is the same and based on full ‘normal’ salary, not furlough pay. Where an employee has a variable salary, there are specific rules. We can guide you through them on a case by case basis.
If an employee is on minimum wage and was furloughed in March 2020, and are still furloughed now – would redundancy be based on the minimum wage in March 2020 or the new level that came into force in April 2020?
Redundancy pay is based on the rate of pay attributable to the hours in which the employee worked. If their last working day was before the national minimum wage increase, redundancy pay is based on the rate before furlough began.
When making a short service employee redundant, do you need to justify doing it whilst the furlough scheme is still in place?
You should always try and find ways to avoid making employees redundant. Regardless of their length of service. But, if the furlough scheme wouldn’t make any difference, you would be ok to carry on with the redundancy. A short service employee cannot claim unfair dismissal, so the risk is minimal. If their pay varied when they were last working, then you would need to work out an average. We can advise further if needed.
Van you stagger redundancy payments?
Redundancy payments should be one lump-sum payment. Usually either within the employee’s final pay, or on an agreed date after. You can stagger the payments if your staff consent to this. To avoid any risk completely, a better option would be a settlement agreement, which ELAS can assist with.
If I make someone redundant whilst on furlough, can they stay on furlough for their notice period? Can you use the JRS to pay them during their notice period? Or do they need to be paid in full for their notice period?
Yes. The employer would normally need to pay the employee in full for their notice period. However, the employee can remain on furlough and the employer can recover 80% back for the notice period.
What if an employee you want to make redundant isn’t on furlough?
In a genuine redundancy situation you must adopt the appropriate consultation process. It does not matter whether the employee is on furlough or not. This does not change the legal requirements for redundancy. You can’t use furloughed to separate employee pools.
Can a business justify not being able to afford the furlough scheme when redundancies will cost more?
This will be a business decision based on a commercial assessment of the cost and future stability of the business. Companies will have to start contributing to the costs of furlough from 1
st August 2020. Furthermore, holiday accrual and service continues during furlough. Therefore, companies will have to compare the costs of that against redundancy and the long-term requirements of the business. A business is going to have to make redundancies and still has a lot of staff on furlough. They notified their staff and offered a generous package for those who accepted before a set date. That date passes without a volunteer and you need to make redundancies. Do you still have to offer the same package?
Voluntary redundancy is not compulsory. If you have made it clear that the package is only available until 31/07/2020 you don’t have to offer it after that date.
An employee is currently on furlough. Their job is no longer sustainable after 1st November 2020 due to a downturn in work. C an you make a redundancy on 30 th September 2020, providing 4 weeks’ notice period (finishing employment on 31 st October 2020) and then paying redundancy costs in addition? Would this fit the rules for redundancy under furlough? Yes, if you undertake the required consultation process prior to that and if 4 weeks is the correct notice period. In most cases, notice pay would be at 100% normal pay. However the employee can remain on furlough for that notice period – i.e. you would need to ‘top up’. Haven’t Found The Answer You Need?
You’re likely to have many questions about the furlough scheme, redundancies and how they work. That’s where our team can help. We’re offering free consultations to every business owner to discuss the issues your business is facing.
Simply call our team today on 08450 50 40 60 or complete the contact form today and we’ll be in touch as soon as possible.