As a business owner, we know you try to plan for every possible situation but unfortunately, nobody could have predicted what 2020 had in store.
We have seen many companies enter administration since the UK’s lockdown period began, including retailers such as Laura Ashley, Debenhams and Brighthouse.
As we continue to adhere to social distancing, many businesses remain closed or may be operating at reduced capacity, putting financial strain on the most stable of businesses. Many of you will have furloughed a significant proportion of your employees to reduce overheads. However, from August, changes to the Government’s Coronavirus Job Retention Scheme (CJRS), mean that employers will have to start paying their employee's national insurance contributions and pension contributions, and can no longer reclaim them through the CJRS. From September, employers will be required to contribute to an employee’s salary and for some this may not be a viable option.
In a recent survey conducted by the Institute of Directors, it was found that a quarter of businesses using the CJRS say they will struggle to contribute to the salaries of furloughed workers from this date. Many will be considering what options they have and for some, unfortunately making redundancies may be the only way forward to ensure the business remains viable.
Here, we speak to Head of Employment Law at Banner Jones Solicitors, Katie Ash, who discusses what steps employers must take to make sure they manage the redundancy process in the best way to try to avoid potential legal action further down the line.
If you are still considering your options our post-lockdown planning blog provides some useful advice.
Making staff redundant
Firstly, it is really important to clarify that when a business is making a redundancy, it is not the ‘person’ that is being made redundant, but rather the role.
To that end, as an employer you must be able to clearly show that the employee’s role will no longer exist. Employers need to ensure that there is a genuine redundancy which means the reason for redundancy cannot in any way be for a different reason such as poor performance or due to a clash of personalities. This is an area where many business owners come unstuck, so it is an important point to address upfront.
Secondly, employers should be aware that they must follow a fair redundancy process regardless of the employee’s length of service, even though they are ONLY entitled to a redundancy payment after they have been employed for two years or more.
The amount that they receive as a redundancy payment under employment law is based on a calculation including factors such as an employee’s weekly gross pay, age and length of service.
If you have reached the point where compulsory redundancies are necessary – be that due to the relocation of the business, a reduction in the work required, or the closure of certain departments or divisions – you are no doubt already under substantial pressure, and it can be easy to make mistakes, which could leave you vulnerable from a legal perspective.
To protect your business, it is vital that a fair process is followed, and this includes communicatingwith staff at an early stage that redundancies may have to take place. This ensures that employees have plenty of warning that they could be made redundant and gives them an opportunity to put forward any suggestions that they may have. Employers should not forget to notify those staff members who are absent from the workplace, such as those on furlough or on maternity leave. This can be done verbally or in writing if face-to-face is not possible. If more than 20 proposed redundancies, then there will be more onerous obligations to inform and consult on a collective basis. This note, does not deal with this scenario and is based on there being less than 20 employees.
On the basis that there are less than 20 proposed redundancies, the next step is to ensure that the correct selection pool is identified and objective and measurable selection criteria are put in place. This consists of compiling a list of roles which could be affected based on the areas of your business that you are reducing, and then agreeing a system by which you identify and log the skills required for the business going forward; and ultimately how you will select who will made redundant.
This may seem impersonal, but as the main objective is to remain impartial and non-discriminatory, that is actually a good thing during the redundancy process.
Once you have started the redundancy process, you will need to enter into what is known as a consultation period with the employees. This consists of setting up a two-way dialogue with you and the employees who carry out the roles that you have selected for potential redundancy. This is an opportunity to look at the possibility of avoiding the redundancy, for exampleby reallocating an employee to a different role. This would usually consist of at least two meetings.
At the first meeting, you will explain why the employee has been selected for redundancy and invite them to discuss their options. For example, they could be willing to job share in order to keep working.
If no alternative to redundancy can be identified, then you will usually be required to have a second meeting with the employee to discuss your decision and what happens next, including any entitlements the employee has. These meetings can take place over the phone if the employee is unable to have a face to face meeting.
Finally, formal notice of the redundancy must be sent in writing to the employee and they should be offered the right to appeal the decision. Although if the process has been followed correctly, there may be little grounds for them to do so.
It can be a tough process for all concerned – with redundancies inevitably causing some upset amongst the workforce, and a wider sense of uncertainty across the business.
In an ideal world, you would look to avoid the scenario altogether by considering other options – such as seeking applicants for voluntary redundancy and early retirement; offering existing staff reduced hours of flexible working; reducing or putting a halt on overtime hours; retraining or redeploying existing employees to carry out new or different roles.
However, if you have explored every other avenue and are left with little choice but to make redundancies, having the correct processes and policies in place beforehand can help to ensure that you are legally compliant and protected from any potential claims.
Just remember, making someone redundant is not a quick and easy way of dismissing a problematic employee. If you cannot demonstrate that the role itself is a genuine redundancy, you could find yourself facing legal proceedings for unfair dismissal, which can be costly, time consuming and potentially damaging to the business’ reputation.
If your business needs any advice on the furlough scheme or the redundancy process please do not hesitate to get in touch with our Employment Law team. Appointments can be done over the phone for your convenience.