17 Jun 2020

As we start to come out of lock-down, many small business owners may be reviewing what #lifeafterlockdown will look like for them, their business and their teams

The furlough scheme was put in place by the UK Government to prevent mass redundancies across the whole of the UK workforce due to the coronavirus outbreak … it is, in effect, a deferred redundancy scheme. Now that we are starting to return to work, all businesses need to re-assess their position and look at what employment options are feasible for them, both in the short-term and beyond

Whilst the Coronavirus Job Retention Scheme (CJRS) is still available, you should be using the opportunities that it provides to bring your team back to work on a cost-effective phased return. However, looking forward to the end of the scheme (on 30th September 2021), you may need to take a critical look at your organisation’s structure to identify what you can and can’t afford up to year-end and beyond

Just because furlough has been described as deferred redundancy, this doesn’t mean that as soon as it ends, everyone on furlough can be made redundant – it’s not as simple as that; it’s also not ethical to take this view. Redundancy is not a cheap option – there are costs and rules that apply, so let’s look at what they are (especially with the small business in mind)

A genuine redundancy occurs when there is a legitimate business reason for this decision, usually because the business or operation has ceased or diminished. What this means is that redundancies can genuinely occur when …

• a business, or part of a business, ceases or stops operating due to insolvency or some other financial / operational reason, such as the death of the sole owner
• the business, or the work employees are doing, moves to another location
• the skills for a job are no longer needed because of a change to ways of working
• new technology means that fewer employees are needed to do a job
• a restructure or reorganisation of the business means that certain jobs are no longer needed or are changed significantly
• a significant and / or persistent drop in business levels means that the business needs to downsize to remain solvent

Another point worth noting is that it’s positions that are made redundant, not people. This may sound both insensitive and odd as individual people are definitely made redundant - what I mean by this is that if a job role is at risk of redundancy, every job holder in that role becomes at risk of redundancy regardless of what you think about them as individuals – you, as the employer, can’t cherry pick who is at risk and who is safe; you need to follow a fair and transparent process to avoid discrimination or unfair dismissal

For example, a job is made redundant because it ceases to exist then, as a business, you can’t resurrect that job role again for at least 6 months. If you actually need the job role but not the person in it, then this is not a redundancy situation - you need to follow another process to rectify that situation

Alternatively, if the need for a job diminishes - for example, you have 5 people currently employed to do a particular job but, due to current demand, there is only work for 3 people, then one option would be to go through a redundancy consultation process with all 5 job-holders (not just those you don't want) with the objective of making 2 positions redundant 

To be fair to your team, you must clarify how you are going to select who will be made redundant before you start the consultation process. Selection criteria can include:

• voluntary redundancy requests
• length of service – last in, first out (but be aware of age discrimination as this could adversely impact younger members of the team)
• attendance and / or disciplinary records
• skills, competence and / or qualifications

Whichever selection criteria you choose, aim for transparency – your employees should be able to identify that your redundancy outcome decisions have been made fairly

Be aware that it is automatically unfair if you make someone redundant because they are …

• pregnant or for maternity related reasons
• part-time
• a member of a trade union / not a trade union member

One aspect of the redundancy process that is critical to its fairness is the redundancy consultation process. There are statutory guidelines that are applicable to this process and these are as follows:

• If your company needs to make 20 – 99 redundancies within a 90-day period, you must allow a 30-day consultation process prior to dismissal
• For 100+ redundancies over the same period, the consultation process increases to 45 days prior to dismissal

In both cases, you have a statutory duty to hold collective consultations with your employees and you will need to notify the Redundancy Payments Service before consultation starts

There are no set rules however, for cases where less than 20 people are to be made redundant within the 90-day period, but it’s best practice to hold individual consultations with all those at risk of redundancy in this situation

As redundancy terminates an employee’s contract with their employer, ACAS guidelines stipulate that a meaningful consultation should take place. This means that the employer holds a two-way conversation with the employee, prior to any decision being made, to discuss potential alternatives to redundancy, such as job-sharing, reduced hours, other vacancies, etc. What makes this consultation meaningful is that the employee can influence the decision – often the person doing the job may have a better insight as to what’s feasible than their manager or business owner and these insights could impact the outcome of the consultation

There is no statutory right for an employee to be accompanied at the consultation meeting, but you may wish to offer this option and let them have a work colleague as a companion

The redundancy process I usually follow within a small business, where less than 20 redundancies are expected, is as follows:

1. Brief the whole team, giving a broad overview of why redundancies are being considered and which job roles are potentially at risk
2. Invite each of those at risk of redundancy to attend an individual 2-way consultation meeting to discuss their options, suggestions, and alternatives to redundancy
3. Hold the 2-way consultation meeting and take notes of the discussion – encourage the employee to ask questions and make suggestions; explore the options together but don’t make any decisions as this stage. During lock-down, this discussion can be done via Zoom or other video conferencing service rather than face to face
4. Once all the consultation meetings have taken place, review all the options identified and decide how to move forward … this is where and when you make any redundancy decisions
5. Individually confirm the outcome of the consultation process in writing to all those who participated in it
6. Brief the wider team on the outcome of the consultation process – big picture only

These 6 steps can be completed in 5 – 10 days as you must allow time for the at-risk employee to prepare between steps 2 & 3 – at a minimum, allow 48 hours between these 2 steps

As the business owner, it is also useful to have a sounding-board for step 4 – this could be another director or senior manager within your business or your HR advisor, but it needs to be someone you trust, who will be objective and act as devil’s advocate so that you make the best decisions for your team and business

Once the redundancy decision has been confirmed in writing, those with 2 years’ service should be offered support and allowed reasonable time to research job opportunities and attend interviews during their notice period; you can extend this option to all those who are confirmed as redundant if you choose. As many employees are currently furloughed, you may need to check-in with individuals to identify what support they need and signpost them to people within your network who may be looking to recruit 

With regards to the cost of redundancy, employees who are made redundant have a statutory right to receive redundancy pay once they have completed 2 years continuous service. Statutory redundancy pay (SRP) rates are linked to age and must be paid by the employer - you can’t use the CJRS to offset the cost of SRP

Employees are also entitled to be paid their wages up to their termination date, along with any untaken accrued holiday pay and any other outstanding monies owed them, such as commission or expenses. All payments should be processed on the pay date immediately following their termination date unless otherwise agreed in advance with the employee

In a redundancy situation, as the employer is terminating the contract of employment, the employee is entitled to be given notice – this notice period will be defined in their contract, otherwise statutory notice applies (one week’s notice for each completed year of service, capped at 12 weeks)

As the employer, you do have the right to require the employee to work their full notice - there are also other options you may choose, if they are more appropriate:

• The employee can work their notice and be paid accordingly – if they are on furlough, you will have to top up their pay to 100% during their notice period
• You can pay them in lieu of notice at their normal rate of pay, or
• You can require them to work part of their notice period, then pay them for the unworked part of their notice period at their normal rate of pay.

With regards to notice payment, factors to consider here are morale and productivity – if redundancy has been confirmed, how engaged with the business is the affected individual likely to be? The length of notice and the number of redundancies can also be factors to consider – as a business owner, you need to make the best decision for your business … and the people affected (both those who are leaving … and those who are staying)

There may be a lot to take in here, but I’ve tried to cover the main elements of the redundancy process. If you need any additional support, I can help with one or more of the following:

• preparing a redundancy policy document for your business
• planning your redundancy process
• forecasting possible redundancy entitlements
• assisting with the consultation process
• providing the template letters and documents you need throughout the process

If you want more information, please get in touch to book a free 30-minute consultation, available until 30th September 2021

« Back