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A failure to follow redundancy rules could cost businesses dearly

The Government has confirmed the extension of the Coronavirus Job Retention Scheme (CJRS) just hours before it was due to close on 31 October, as a new national lockdown in England was announced. But how will this affect employers?

The extension of the furlough scheme means that the new Job Support Scheme (JSS), which was due to begin on 1 November, will now be postponed until the CJRS closes.

The extended CJRS will operate on similar terms to those in place in August 2020. CJRS grants will cover 80 per cent of a furloughed employee’s usual wages, capped at £2,500 a month, while employers will be required to cover employer National Insurance and pension contributions.

They will not be required to contribute to employees’ wages, as had been required in September and October.

Despite this lifeline, some businesses that have struggled with the economic impact of Covid-19, may be faced with the difficult decision of making staff redundant.

However, it is important to understand that there are a number of key legal considerations when downsizing your workforce in this way.

To help you prepare for redundancies post-furlough here are some points that every business should consider:

Grounds for redundancy

The law states that a genuine redundancy situation, which allows an employee to be dismissed, may arise where an employer has ceased or intends to cease business or the place of business where the person works closes. Businesses can also seek redundancy where there is a reduced requirement for employees to carry out a particular kind of work.

A tribunal will generally be satisfied that redundancy is the genuine reason for a dismissal if employers follow the ‘procedural fairness’ guidelines, which confirm that an employer has not acted unreasonably if they have:

  • Issued warnings and consulted
  • Adopts a fair basis on which to select for redundancy
  • Considers suitable alternative employment

Timing

When making a considerable number of redundancies it is necessary to notify the secretary of state and hold a consultation period with your employees and their representatives.

Where you intend to make more than 100 redundancies this period is 45 days, while for redundancies involving 20 – 99 employees the period is 30 days.

Consulting employees

Even where you are not required by law to consult with employees, such as cases involving fewer than 20 employees it is strongly recommended that you do so to avoid future claims or disputes.

By consulting with employees, you may be able to identify individuals who are willing to leave voluntarily, which may simplify the process. It also helps to demonstrate that you acted reasonably as per the ‘procedural fairness’ guidelines.

Take care not to discriminate

Employers must take the utmost care to not conduct themselves in a discriminatory manner when selecting candidates.

During this process, employers should consider whether any employees are pregnant, or on maternity, adoption or shared parental leave as special rules apply to them on redundancy.

They should also be aware of protected characteristics and how these may affect the selection process. For example, some methods of selection, such as ‘last in, first out’ could be seen to discriminate against younger members of your team, which could be misinterpreted as age discrimination.

Selecting a pool

Companies will need to select which candidates and roles are at risk.

In preparing this list employers can use various methods to select employees, but the fairest option is often a points-based system, which takes into consideration certain criteria, such as qualifications, experience and the performance of each individual.

Points should be awarded on merit by a panel of three or more members of the management team. Candidates with the fewest number of points can then be added to the pool and consulted.

Making redundancies is rarely straightforward and there many pitfalls that must be avoided, especially if you are considering a sizeable number of redundancies.

It is highly recommended that you seek independent legal advice before undertaking any dismissals to ensure you are compliant and acting within the law.

For help and advice on matters relating to redundancy, please contact Senior Associate, Amanda Hyam, who heads up our employment law team.

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Amanda Hyam

Amanda Hyam

Associate – Dispute Resolution / Employment
I have specialised in Dispute Resolution, Civil Litigation and Employment law for more than 15 years.  I understand how daunting the prospect of litigation can be and because of this I am always available to discuss concerns.

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