Despite the UK securing a trade deal with the EU and the government extending its Coronavirus Job Retention Scheme until the end of April, economic pressures persist, and many employers are preparing for the future by taking prudent measures now to right-size workforces.
The Office for Budget Responsibility, the UK's independent financial watchdog on public finances, predicted back in November that Brexit would ultimately shrink the UK economy by 4% with a free trade agreement, such as the deal signed between the UK and the EU before Christmas.
These worrying portents around Brexit come at a time when the ongoing Covid-19 pandemic has also damaged economic activity in many sectors. Whilst the government's financial support schemes have softened the financial impact for businesses, such schemes cannot last indefinitely or avoid organisational restructures altogether (nor are they intended to).
Read on to see our answers to the key questions that employers are asking around workforce reorganisation: from handling redundancies to furloughing staff and altering terms and conditions.
See our Coronavirus Updates web page for more detailed information on the Coronavirus Job Retention Scheme and other employment-related covid-19 issues.
Yes, if the employee agrees.
Provided an employee consents, they can remain on furlough beyond the end of the CJRS for as long as needed. Such arrangements might involve an agreement to pay full salary, maintain salary in line with the government grant, or even furlough with no pay.
The CJRS gave employers a vehicle for readily agreeing furlough terms with employees and recovering employment costs. Unless the government decides to extend the scheme again, from the 1st May 2021 onwards, employers will need to cover salary and wages for furloughed staff without government reimbursement. Employers will also need to consider whether existing furlough agreements give them the authorisation needed to extend the furlough period or whether they will need to agree on any extension with employees afresh.
It is worth checking for any contract clauses enabling lay-off without pay (though such terms are rare and must be, exercised cautiously with consultation and proper notice).
Be aware also that employees who have been laid off for four or more continuous weeks, or six weeks in thirteen weeks have a right in some circumstances to resign and claim a statutory redundancy payment.
Yes, if the employee consents.
Suppose a trade union is recognised for collective bargaining purposes. In that case, it might be possible to agree on alterations with the union, which may be binding on employees or enable individual agreement with staff.
If there is no trade union, the employee's consent must be acquired individually and should be supported with evidence in writing.
Instead of employee consent, there may be contractual clauses authorising unilateral changes, though truly effective provisions are uncommon and must be, in any event, used with great care. Alternatively, there might be a clause enabling the employer to impose lay off or short-time working (again, subject to consultation and proper notice).
Depending on the nature of the proposals, it may prove difficult to obtain consent or, worse, an angry response could be provoked. Transparent consultation that clearly explains the rationale behind the proposals may help prevent a backlash from employees and trade unions.
If an employee refuses to agree to the proposed changes, even after an extended period of consultation with that employee, the employer may need to impose the proposed change through dismissal and re-engagement on the new employment terms.
Such a dismissal can be shown to be fair in the face of any subsequent unfair dismissal claim and a well-run consultation process that addressed the important business reasons for the proposals could provide a good paper trail to justify any subsequent dismissals.
Be aware that if 20 or more dismissals are proposed, collective consultation requirements will be triggered.
Below we look at some specific redundancy questions relating to furlough. To better understand redundancy processes as a whole, see the handy FAQ on our Redundancies and Reorganisations web page. You will also find our Redundancies Q&A Webinar a useful watch.
When a redundancy situation arises, the fact that furlough is a possible alternative does not necessarily mean that a dismissal will be unfair. It will depend on the particular factors at play, including the size and resources of the employer.
There may be valid organisational or business reasons for employers to make furloughed employees redundant despite the scheme's extension. There may also be financial reasons for discounting furlough as an alternative to redundancy as, although the CJRS is extended until the 30th April 2021, employers have had to contribute to furlough pay since the 1st August 2020.
Amid a pandemic, some roles have unfortunately disappeared, and other workplaces have shut altogether. The fact that there may be a demand for more staff again in the future does not mean that an employer must continue to furlough employees. However, employers would be wise to consider furlough as an alternative to redundancy and document their reasons as to why it would not be appropriate.
Payments in lieu of notice cannot be reimbursed under the scheme.
With an employee who works their notice period whilst on furlough, an employer cannot claim for any days' notice worked from the 1st December 2020. Any notice worked before this deadline may be recovered under the scheme.
The calculation of a furloughed employee's notice pay would be based on their entitlement under their employment contract and the statutory right to notice pay. New government regulations essentially mean that employers are required to increase pay to its pre-furlough level for employees working their notice period (if their notice entitlement is the statutory minimum or a contractual entitlement that does not exceed the statutory minimum by one week or more).
For any notice period that exceeds the minimum statutory requirement by one week or more, the terms of the contract of employment would need to be considered. The notice pay entitlement is likely instead calculated by reference to what they would otherwise have received during their notice period (which will be their reduced furlough pay if they remain furloughed for the entire duration).
Statutory redundancy payments are calculated with reference to the length of service, age, and a week's pay (which is capped at £538 per week until April 2021). Many employees earn above that cap, even on reduced furlough pay. For furloughed employees who have had their pay cut below that cap, the question arises as to whether they should be paid statutory redundancy pay at their reduced furlough pay rate or their original pre-furlough salary. The government passed regulations in July 2020 requiring statutory redundancy pay to be based on pre-furlough rates of pay.
Redundancies and reorganisations are challenging for employers to navigate at the best of times, never mind amidst a pandemic. If you need any assistance with managing furlough, changing terms and conditions of employment, or carrying out redundancy processes, our team of Employment Solicitors would be happy to help. You can also contact us on 0161 941 4000 or email The Employment Team for more information.