Employment Law: Redundancies as we exit the pandemic

As we start to see an exit out of the covid 19 pandemic, the issue of staff redundancies will be in the news. The reasons for this are obvious. 

Since March 2020, businesses who otherwise would have made staff redundant, have, in many cases, avoided the need to do so because of the Coronavirus Job Retention Scheme (CJRS). This is the mechanism through which employers are able to place staff on furlough, and recover a percentage of their salary (at times up to 80%), through the scheme. 

I have had lots of conversations with clients and other professionals such as accountants about this, and the consensus is that once furlough ends, those redundancies that were put on hold, will start to happen quickly.

Employers that have held off on redundancies would be wise to consider the next steps they might want to take, when the financial support ends. The focus on this article, is to break down how redundancy occurs in law, something that many employers assume is more complicated than it actually is.

If the number of affected staff is over 20, then collective rules apply. I do not focus on those for the purpose of this article, but on the smaller number redundancies, that affect SME’s on a more regular basis, and that will have to be faced when furlough ends, currently in September 2021.

The legal position relating to redundancy of staff sets out that it can happen in one of three situations, business closure, workplace closure, and the most commonly used, a reduction in the need for staff to do work of a particular kind:

1)

Business
Closure

This is as simple as it suggests. If a business ceases trading, the staff will be redundant. 

2)
Workplace
Closure

This situation is where a particular premises that the employer runs closes but the wider business remains open. This is also a redundancy situation. Many employers do not understand the basis of how this works. Eg, if an employer runs two factories, one in Brighton, and one in Worthing, and closes the Worthing one, the staff there are all redundant. The employer cannot cite the Brighton factory as being nearby, and the staff not redundant as a result, unless they have an active mobility clause in the staff contracts i.e. that allows them to be moved to other premises, and has been used in the past. Without both of those points applying, the staff will be redundant. A passive mobility clause 

i.e. one that is in the contract but has not been used, will not avoid a redundancy situation.

3)
A
reduction
in
the
need
for
staff
to
do
work
of
a
particular
kind.

This is the most common route to staff redundancies. The staff are redundant if the employer no longer has the requirement for staff to do work of a particular kind. The test is not whether the work still exists, but whether or not the role is needed to do the work. This means that redundancy can be because of specific work reduction, for costs saving purposes, or for re-organisation purposes. As an example, in hospitality, a widely affected area, a bar owner may have two bar managers, both of whom share shifts, so both are needed. The employer may decide to make one of those redundant to save costs, despite the work need being there, and do some of the shifts themself. That would be a genuine redundancy, as the requirement for a bar manager has ceased. They would of course have to have a fair selection process to decide which employee goes, but one of those roles 

is redundant. 

A redundancy situation does not occur under this heading if an employee is made “redundant” and someone else is hired into exactly the same role. Using the above example, if another bar manager is immediately hired, a redundancy situation would not exist.

An employee made redundant under any of the above scenarios will be entitled to statutory redundancy pay. The right to qualify for that pay is conditional on two years continuous employment with the employer.

The reason why it is important for employers to get this process right, is that if an employee is not redundant, or they are unfairly selected, or a fair procedure is not followed, the employee will have an Unfair Dismissal claim, and could receive much higher amounts of compensation.

Please always take advice on any staff related issues.

By Alex Jones,
Managing Director,
365 Employment Law

Alex Jones
365 Employment Law Solicitors
Tel: 01903 863284
ajones@365employmentlaw.co.uk
www.365employmentlaw.co.uk