Are there alternatives to redundancies?

Today marks 45 days to the end of the current furlough scheme. This morning news reports suggested many employers, anticipating making more than 100 staff in the same location redundant, are commencing the mandatory 45 day collective redundancy consultation process. Sadly, this will mean many employees will be receiving an ‘at risk’ letter today and will be invited to their first consultation process in a few days.

What is not commonly appreciated however is that redundancy is only one of many possible routes available to employers faced with costs they feel cannot be met. I have outlined these options below, along with questions the employment lawyers in Slater and Gordon are commonly asked.

Alternatives to redundancies: 

Changing terms and conditions: As an alternative to losing their jobs, employees may take a more practical approach and agreed to change their terms and conditions. This could include things like hours or pay, enabling the employee to keep their role and reduce the cost on their employers. This could be a permanent or semi-permanent arrangement until business picks up.

Retain staff on a ‘Furlough’ style arrangement: It is possible to retain employees on a ‘furlough arrangement’ similar to a lay-off, provided the employee agrees to an extension. The employee retains their employment status and for some important benefits such as health insurance, but of course an employer would not be able to reclaim the salary or other costs, which may not make this option particularly attractive . However, it is an option to consider nonetheless.

Unpaid or reduced pay leave arrangements: For some employees it may be difficult for them to return to work. For instance, if they have childcare issues our care responsibilities. They may be very open to exploring different options which retain their employment without a salary, or a significantly reduced salary for a period of time while on unpaid statutory parental leave or unpaid sabbaticals. This allows the employee some breathing space until the current economic situation improves and hopefully redundancies are not necessary.

If any of these options are available the agreements should be written up clearly, with pay arrangements and time frames set out, along with the process for revising the arrangement.

It is incumbent upon employers, now more than any time in recent memory, for employers to engage with employees and avoid redundancies where possible. However, if redundancies cannot be avoided, employers should be sensitive to not only the financial but also the emotional impact to their employees in the way this process is communicated and carried out.

Commonly asked questions:

1. Can we make employees redundant during the furlough scheme and still claim for other salaries? There is nothing in the scheme that prevents this. However the purpose of the Coronavirus Job Retention Scheme was to save jobs and to enable employers to maintain their workforce. After the Furlough scheme ends, HMRC are likely to probe into employer's claims and quick redundancies could draw suspicion.
2. Can I use payments from the furlough scheme for redundancy payments? No, this is not permitted.
3. How is notice pay calculated for employees on furlough? This isn’t straightforward. The government provided some clarity on 31 July 2020 to ensure that employees will receive their notice pay based on full pay, rather than reduced furlough pay. This changes the rules which had previously existed and which were quite complex. Therefore, in most cases when making a furloughed employee redundant after the 31 July an employer will need to top up their notice pay to usual rates, even if they cannot recover this through the government scheme.
4. Can I recover pay in lieu of notice (PILON) under the furlough scheme? This occurs where the employer is seeking to exercise a PILON clause in an employee’s contract, rather than require them to work their notice or go on garden leave. Effectively this brings forward the employee’s employment termination date. Our view is that it would not be permissible to claim payment paid by way of a PILON as this would be contrary to the purpose for which the scheme was set up, namely to continue employment. However for as long as the Furlough Scheme is available you can still claim the normal salary for a furloughed employee serving their notice or on garden leave as they are still employed during this time. 
5. Can I consult with a furloughed employee? Yes, our view is that this would not constitute 'working for the employer' and therefore there's nothing preventing a consultation process taking place with the furloughed employee.

In normal times, a redundancy process can be fraught and is is easy to get the process wrong meaning employees can, and often do, challenge the fairness of the process. If you are an employer it is advisable to take advice on the process to ensure you are operating with the legal guidelines. If you are an employee and your employer has not followed a fair process you may be able to challenge this and negotiate a better redundancy package as a result.

Please feel free to contact me in confidence if you would like to discuss any of the points above or need advice and guidance on redundancy or any other legal issues at work.