The CJRS has already started to taper support before the eventual end date on 31 October 2020 as the government from 1 September 2020 will now only pay 70% of wages up to a cap of £2,187.50 and employers must pay employer NICs and top up wages to 80% up to £2,500 cap. As the end date approaches and the level of support wanes employers are undoubtedly assessing whether the business can afford to retain the pre-COVID staffing levels.
If the answer is no, then redundancies are the next logical step. It may be that a large proportion of furloughed employees are unwittingly unemployed without themselves, or their employers knowing yet.
ACAS have published figures suggesting this influx of redundancies is already underway, with calls to their redundancy helpline up 160% for June and July 2020 from the same period in 2019.
Statistics from ONS for the last quarter show redundancy levels at the highest since February to April 2013. These are still well below the 2008 levels but the decrease in employment levels in the last quarter was the largest since May to July 2009.
Those statistics must be viewed in the knowledge that the last numbers from HMRC on 19 August 2020 showed 9.6 million jobs had been furloughed and a large proportion of those remain on full or flexible furlough.
Research by the Chartered Institute of Personnel and Development (CIPD) also suggests 1 in 3 employers expected to make staff redundant between July and September 2020.
Finally, in our own experience advising both employers and employees we have seen a marked increase in redundancies. For employees these are predominantly voluntary redundancies, which are often offered as a first stage of a redundancy procedure to avoid compulsory redundancies. For employers we have advised on anticipated redundancy procedures.
The cost of redundancies
Employees with at least two years continuous employment are entitled to a statutory redundancy payment which is calculated based on their age, continuous service, and weekly pay (subject to the current cap of £538).
On 31 July 2020 the Employment Rights Act 1996 (Coronavirus, Calculation of a Week's Pay) Regulations 2020 (SI 2020/814) came into force. The regulations prescribe that a week's pay for employees made redundant on or after a period of furlough must be calculated by reference to their normal pay (subject to the cap of £538) rather than their reduced furlough pay.
This also applies to statutory notice pay during furlough and a number of other payments including assessing compensation for unfair dismissal.
What cost can be recovered from the CJRS
Employer's cannot recover the cost of the statutory redundancy payment from CJRS however, the CJRS can be utilised to pay notice pay provided this is worked and not a payment in lieu of notice. Such pay would need to be topped up to normal pre-furlough pay in line with the Regulations above.
Whilst redundancies seem inevitable and it is permissible to conduct these during furlough they must still be fair and reasonable in the circumstances and this means following a fair procedure in the first instance.
Generally, this involves:
- Identifying an appropriate pool for selection;
- Consulting with individuals in the pool (or collective consultation if it is envisaged that 20 or more employees will be made redundant in a 90 day period);
- Applying an objective selection criteria to those at risk of redundancy; and
- Considering suitable alternative employment.
Employers must already consider alternatives to redundancy in order for any dismissal to be fair, namely, considering whether there is any suitable alternative employment that the employer can offer and meaningfully consulting with affected employees about ways they can avoid redundancies.
However, it may be more prudent than ever to try to avoid redundancies. Not only to retain trained staff but to avoid costs associated with redundancy.
Although the CJRS is certainly coming to an end there are other options employers could consider. The below options may be used as standalone alternatives or combined to form a private alternative to the furlough scheme albeit without the government grant.
1. Lay off
The CJRS was, in effect, a method of lay off although the government subsidised the employees' salary. Under normal circumstances, employees are not working during a period laid off and therefore are not entitled to pay. They may be entitled to a statutory guarantee payment which is subject to a maximum daily limit and a maximum over a three month period.
If the contract expressly provides for this then employers may seek to exercise this option and lay staff off whilst they wait for the dust to settle at a time when they can assess the impact of coronavirus on their business and accordingly their staffing requirements.
If there is no express permission in the contract then employers may be able to negotiate a change in their employment contracts to provide for a lay off clause.
2. Short time working
As above, employers who have placed employees on flexible furlough have already implemented short time working – reducing working hours and pay. When the scheme ends this can still be an option available.
If there is an express clause in the employment contract then, again, it may simply be a matter of enforcing this clause. If none exists then employees may see this as a lesser of two evils in order to retain steady employment, continuity of service and the corresponding employment rights, and in the long-term hopefully a return to full time working
3. Salary cuts
Employers may be able to consult on a pay cut for affected employees, whether as part of the consultation requirement of the redundancy process or in an attempt to avoid redundancies altogether.
Job Retention Bonus
Employers considering any of the above must be mindful of the qualifying criteria for the Job Retention Bonus.
Employees must be continuously employed until the end of January 2021 and must have earned something every month, on average these earnings must be at least £520.00 per month. The bonus will not be payable if the employee is serving notice commencing before 1 February 2021.
Whilst likely not enough on its own to avoid redundancies especially for higher earning employees, employers should include this bonus as part of any consultation and explore whether it could assist in avoiding redundancies. Coupled with one or more of the above it could represent a real alternative to avoid or mitigate redundancies.
Our expert Employment Law Team work with employers to understand their business and the problems they face, find a tailored and pragmatic solution that will suit their needs and help implement any changes. For more information contact us on 01603 693500 or email us using the 'Make an enquiry' form on our website.
*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.