One of the key issues arising from COVID-19 is the drop off in business for many organisations. Some businesses will be able to offset this through a range of measures such as diversification, recruitment freezes, changing employees' working hours or reducing property costs as large pockets of workforces continue to work from home. However, many will be looking at reducing staff numbers, particularly as the Coronavirus Job Retention Scheme (CJRS) comes to an end.
Many businesses will not have had to consider redundancies for a number of years so we have been providing guidance around the basics, while also advising business that are more experienced in handling redundancies on the best approach in the current circumstances. That has included a very well-attended webinar on how to manage an effective redundancy programme during COVID-19. We received a number of questions from delegates, both in advance of the webinar and during it, and we did not have time to answer all of them. We have picked out some of the most interesting questions and set them out below with our answers. One of those questions relates to notice pay during furlough; the Government has announced some new legislation on this so this represents a timely opportunity to give our initial views, subject to sight of the draft Regulations.
Can you be 'kinder' to an employee and extend their notice period so you can take advantage of the CJRS and therefore buy them more time receiving funds whilst they look for alternative employment?
We would advise against serving notice for a longer period than is set out in an employee's contract (or for a longer period than statutory notice where that applies). The reason for this is that such an approach appears to us to go against the spirit of the CJRS and could be questioned by HMRC in the event that an employer was subject to an audit.
A safer approach if you want to be 'kind' would be to consult for a longer period of time and then serve notice later on so that the expiry of the usual notice period coincides with the end of the CJRS. However, there are a number of factors you would need to consider:
- Business prospects could change meaning that, by the time you come to serve notice, redundancies are no longer required (or fewer redundancies are required)
- This could result in different employees affected by a proposal being served notice at different times, which may lead to feelings of inconsistency/unfairness amongst your employees and be difficult to manage from a practical perspective
- Whilst the Government currently does not intend to extend the CJRS, it will come under increasing pressure to do so, at least on a sectoral basis. A change in policy cannot be ruled out.
How do we support staff with mental wellbeing virtually when they are potentially at risk, and may feel isolated due to COVID-19, and won't have that natural support they would get from team mates and others when they are normally in the office?
There are a whole range of options available to you here as follows:
- Many employers will have an Employee Assistance Programme (EAP), usually provided by a third party organisation. You should ensure that you encourage employees to use it during consultation meetings and in all correspondence relating to the redundancy process. If you do not have an EAP you may want to look into setting one up. If you use an external occupational health provider, they may offer an EAP
- You should also engage with employee representatives and/or your recognised unions to see if they can assist. For example, you could encourage them to check in with employees and make sure they recognise that a higher level of support than normal may be required
- You could also encourage affected employees to set up their own Whatsapp or Slack support group or support meetings through Teams or Zoom or to check in with each other through more traditional means such as regular phone calls
- Another option would be to ensure that, during your consultation meetings, you ask employees if they would like their line manager to check in with them from a pastoral care perspective. However, you should not assume they do and it is important to get employee buy-in rather than make assumptions about the level of support required
- Finally, if you are particularly concerned about an individual employee you should consider an occupational health referral.
If an employee's employment is terminated during their probationary period or before two years' service due to COVID-19, does this count as a redundancy?
- The short answer is yes. If an individual's employment is terminated because of a business closure, a site closure or a reduction in work requirements then this will constitute a redundancy.
- That said, an individual with less than two years' employment is not entitled to a statutory redundancy payment (although you will need to check whether these employees are entitled to any contractual redundancy payment).
- Nor do these individuals have the usual rights not to be unfairly dismissed. As a result, in the event that the only individuals being made redundant have less than two years' service and there are fewer than 20 redundancies then, strictly speaking, there is no need to run a full redundancy process and there is – for example – no need to run individual meetings.
- However, we would still recommend that you follow any standard redundancy process as best practice in any event.
- We should also highlight that the reason for the redundancy must still be fair. If, for example, a person is selected because they have blown the whistle, or raised health and safety issues, then any dismissal will be automatically unfair.
- You must also still take the usual steps to avoid any discrimination and there is a risk of indirect age discrimination arguments being raised if you exclude employees with short service from a full consultation process.
Can a business encourage employees to use holiday during the notice period?
- Yes, there is nothing preventing an employer from encouraging employees to use holidays during their notice period. Further, the Working Time Regulations allow an employer to give notice to a worker requiring them to take leave, provided that the period of notice given is at least twice the length of the leave period which an employer is asking an employee to take. (For example, if the employer would like the employee to take one week's holiday, they will need to give two weeks' notice)
- This will avoid the need to pay the worker in lieu of any unused holiday
- The statutory notice provisions can, however, be varied through employment contracts or certain agreements with unions or other employee representatives so you should carefully check any relevant documents before exercising a right to require employees to take holiday
- All employees should be treated in the same way, in order to avoid any allegations of discrimination
- Even If you do not go so far as to serve notice, it is always good practice for employers to encourage employees to take their annual leave.
If we are making fewer than 20 redundancies, what is the recommended or best practice length of consultation period?
- There are no prescribed timescales set out in the relevant legislation
- An employer needs to follow a fair and reasonable procedure in order to avoid unfair dismissal claims
- Consultation with individual employees is fundamental to the fairness of a dismissal for redundancy. The shorter the period of consultation, the more likely it is to lead to a finding of unfair dismissal and it is no defence to argue that consultation would have made no difference to the outcome
- The employer's size and administrative resources are relevant and can affect the nature of the consultation required. This does not excuse a small employer from failing to consult but does mean that an employment tribunal will expect a large employer with a dedicated HR team to carry out a comprehensive consultation exercise
- Consultation must be genuine, with the employee being given adequate time and information to respond and the employer considering any response properly
- Our view is that a consultation period of less than two weeks is unlikely to be sufficient. Given that consultation will be more complex and time-consuming during COVID-19 (if the affected employees are furloughed or working from home), consultation should last for a minimum of two weeks and possibly longer, depending on the circumstances.
If furloughed staff are being made redundant, is notice on full salary or furlough rate if notice is during the furlough period?
- There is an argument that, if contractual notice is one week or more longer than statutory notice, you can pay at the agreed rate for the notice period (ie 80% for furloughed hours and 100% for working hours). If the notice is less than that, the employee should be paid at 100% of pay. However, we think that employment tribunals are likely to be sympathetic to employees in this situation and will find a way to award 100% of notice pay
- The safest course of action is therefore to pay at 100% while the employee is furloughed, or bring them back to work full-time, or put them on garden leave/make a payment in lieu of notice if the contract permits this
- Paying at 80% also risks an argument that the employer has breached the contract, which would mean that any restrictive covenants/confidentiality clauses etc would fall away, which could be a problem if the individual is in a senior position or has extensive customer connections or contact
- It has been announced today (30 July) that a new law will be introduced with effect from 31 July to require employers to base statutory notice pay for furloughed employees who are being made redundant on their normal pay rather than their reduced furlough pay. (The same will apply to statutory redundancy payments.) This means that furloughed staff who are being made redundant should be paid full pay for their statutory notice. The draft Regulations have only just been published and we are still getting to grips with the detail. It appears that they only apply in circumstances where employees are only entitled to statutory notice and that employees with a contractual notice period that is longer by at least one week could still be paid furlough pay rather than full pay during their notice period. However, this may not be the Government's intention and there remains a risk of employment tribunals finding creative ways of ensuring employees receive full pay during notice. The new Regulations also provide that employees should receive statutory redundancy payments based on full pay.
If you have any queries on this document or in relation to redundancy generally, please get in touch with your usual Womble Bond Dickinson contact.