Coronavirus Job Retention Scheme
The government estimates that 11.6 million jobs have been supported since the scheme began, at a total cost of around £66 billion.
Redundancy ‘D-Day’ approaches
Established as an emergency measure in March 2020 to shield UK businesses from the worst of the economic impact of the COVID-19 pandemic, and extended on multiple occasions, the Coronavirus Job Retention Scheme (CJRS) will finally come to an end on 30 September 2021. After this date, there will be no general financial assistance available from the government to directly subsidise staff wages. The government estimates that 11.6 million jobs have been supported since the scheme began, at a total cost of around £66 billion.
Although, as social restrictions have loosened, many employers have been able to gradually bring furloughed staff back to work, other organisations will face some very difficult decisions in the coming weeks. Recent figures suggest that, at 31 May 2021, around 2.4 million employees were still on furlough, many of whom face an uncertain future.
If you are unsure whether you will be able to continue to employee furloughed staff, or to employ them on their current terms, once financial support is withdrawn, it is crucial to start thinking ahead as soon as you can. We have set out below some key points to inform your workforce planning as the CJRS draws to a close.
- Remember that all employees with 2 years’ service or more will be eligible for a statutory redundancy payment and ‘normal’ unfair dismissal protection. Continuity of service will have continued to accrue during the furlough period. So, even if an employee was a relatively recent starter when they were first furloughed, they may well now have accrued sufficient service to qualify.
- You must consult individually with every employee who is at risk of redundancy. However, if you need to make multiple redundancies, be aware that you may also need to carry out a collective consultation exercise, and that statutory minimum consultation periods will apply.
- Where more than 20 redundancies at one ‘establishment’ are proposed, the minimum consultation period is 30 days. This means that ‘D-Day’, on which consultation must commence to be fully and properly completed by the scheme end-date, falls on 31 August 2021.
- Where 100 redundancies at one ‘establishment’ are proposed, then a longer minimum consultation period of 45 days applies, meaning that ‘D-Day’ falls even earlier, on 16 August 2021.
- Failure to comply with these minimum requirements can impact on the fairness of any dismissals, but an employment tribunal can also make a ‘protective award’ of up to 90 days’ gross pay for each affected employee. This additional sum is designed to punish the employer and to incentivise full and meaningful consultation.
- You will need to think carefully about what the term ‘establishment’ means in the context of your plan. Not every separate place of work will necessarily be an ‘establishment’ in its own right (although it may be). You must consider how the workforce is structured and managed, how work is distributed, and the economic impact of any proposed redundancies.
- Crucially, it is important to remember that CJRS scheme funds can no longer be used to cover employee notice periods. This includes both statutory and contractual notice periods and will cover people serving notice of retirement or resignation, as well as notice of redundancy. You must pay the employee 100% of their ‘normal pay’ during the notice period or, if your contracts of employment allow, make a payment in lieu of notice (PILON) calculated on this basis. Timing any statutory consultation period to coincide with the scheme end-date would enable employees to benefit to the maximum possible extent from furlough funding, before notice is served. However, you are free to serve notice at any time as long as proper consultation has taken place.
- If you do need to make redundancies, remember that the method of working out ‘a week’s pay’ for the purposes of calculating their statutory redundancy payment has recently been changed, to maximise the amount the individual will receive. Put very simply, the new rules aim to make sure that employees will not ‘lose out’ and receive smaller redundancy payments than they would otherwise be entitled to, simply because their working hours and pay have recently been reduced due to furlough. Essentially, the ‘ups and downs’ of furlough are ignored and calculations should be based on an employee’s pre-furlough earnings. If in doubt, seek advice.
- You may be thinking about avoiding redundancies by bringing staff back on reduced hours, reduced pay or on adjusted working patterns. To do this, you may need to make changes to their contractual terms and conditions, which can be a delicate and complicated process, and can require consultation with relevant Trade Unions. It is sometimes possible to impose changes unilaterally, but it is preferable by far to engage with employees and seek agreement to any changes. As a last resort, where agreement cannot be reached, you may choose to dismiss an employee and offer to re-engage them on new terms but this is not risk free and advice should be sought. It is important to serve proper notice of dismissal in these circumstances to avoid claims for breach of contract. Remember that such a dismissal will fall within the meaning of ‘redundancy’ for the purposes of the collective consultation rules mentioned above (even though the individual will re-join the business). If sufficient numbers of employees are impacted, the duty to collectively consult over these dismissals will be engaged.
As we have learned from this challenging experience, the Covid landscape and economic outlook in different sectors can change quickly. You may not know yet exactly how your organisation will be placed at the end of September, and feel hesitant to jump ‘too early’ into consultation and avoid unnecessary worry. Furthermore, it remains to be seen if industry specific assistance will be provided by the Government if the ongoing ‘third wave’ changes the current outlook. However, our view is that is never too soon to open communications, manage employee expectations and answer questions. It is far better to start too early than too late; you don’t need to have all the answers or a ‘cast-iron’ plan.
Please do not hesitate to seek our advice and support if you are unsure of how to manage any aspect of this final phase of furlough.
Nick Newman (firstname.lastname@example.org) is a Principal Associate in the Employment, Pensions and Immigration Team at Weightmans LLP. If you have any comments or questions, please do not hesitate to contact Nick or speak to your usual Weightmans advisor.
For further guidance or support on any employment law issues, contact our employment law solicitors.