Employment Law: The end of Furlough

As we start to see an exit out of the Covid-19 pandemic, the Coronavirus Job Retention Scheme will end. 

This scheme, through the furlough system, has meant that employers have been able to retain staff they would have otherwise made redundant. The issue of staff redundancies will be in the news as the end of furlough approaches at the end of September, as will the large number of these be news in October. 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. 

My view 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. How those redundancies happen is important from both a reason perspective, but given the short time period until the end of September, also a procedural one. If employers make redundancies quickly at the start of October, once the furlough subsidy ends, they will face difficulty arguing that dismissals are not, at the very least, procedurally unfair.

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. Many of these considerations should already be in the mind of employers.

The legal position relating to redundancy of staff sets out that it can happen in one of three situations, business closure, workplace closure (i.e. the location where the employee worked closes), and the most commonly used, a reduction in the need for staff to do work of a particular kind.

A reduction in the need for staff to do work of a particular kind  is the most common route to staff redundancies at this time. 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 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.

How that interacts with the end of furlough, will cause problems for employers. An employer who makes an employee redundant because “furlough has ended”, will not satisfy the test, and will face an unfair dismissal finding. Employers need to be planning for these issues now, if they want to deal with them in October. 

Employers should also think about selection, and whether or not genuine redundancies exist.  The issue of accrued holiday and potentially unpaid wages will also be live in respect of the furlough period. In respect of holiday, using the example of an employee on furlough since last March, they will have 18 months worth of accrued holiday to pay. In respect of wages, an employee who objected to the terms of furlough, and continued to do so, would also potentially have a claim for the difference in wages for the period.

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