How to avoid redundancies as the CJRS draws to an end?
The Coronavirus Job Retention Scheme (CJRS ) was introduced by the government on 20 March 2020 and provided a lifeline to all businesses that have been impacted by COVID 19 and the restrictions imposed by the government to try and control the spread of the virus.
As from the 1 July 2020 the CJRS allowed employers to welcome their employees back to work on a flexible basis whilst still being able to claim the grant for the time not worked by the employee. As from 1 August employers are required to start contributing to the employee costs – see here for full details.
It is intended the CJRS will come to an end on the 31 October 2020 at a time when restrictions are likely to be still in place and businesses are still dealing with the devastating impact caused by the COVID19 pandemic.
No business owner wants to make redundancies but, at the same time, is under significant pressure to save costs. Our Employment Partner, Paula Stuart, is advising her clients on the options available through consultation and agreement with their staff to face with these challenges together and her experience is that her ‘clients want redundancy to be the last resort so I work with them to identify ways to save costs which in turn will hopefully help save jobs’. To assist other businesses Paula has set out below some of the ways available to help save costs:
For those employees who have been furloughed, they continue to accrue holiday during furlough leave as confirmed in the government’s guidance.
By the time employees return from furlough they may have accrued several weeks holiday and it may be helpful for the employer for them to take this holiday sooner rather than later. Employers can require workers to take holiday at a particular time by agreement. If the worker does not agree, then the employer may serve formal notice of not less than twice the period of time they wish the worker to take as holiday and require the worker to take leave, for example an employer must give 2 weeks notice if they wish their worker to take 1 week’s holiday.
An employer may be able to see now that they will not immediately have sufficient work for all staff on 1 November and therefore one option is to arrange for workers to take a fixed number of days holiday when the CJRS ends. Whilst this does not help with cash flow, it does help retain staff in the short term and manage a structured return from furlough.
Employers may also wish to consider asking employees to take holiday whilst furloughed. The guidance has confirmed that workers should be paid 100% salary for the days taken as holiday whilst on furlough and the employer should ‘top up’ the 80% furlough salary if they are not already doing so. Whilst this means a cost to the employer it does address the issue of workers accruing holiday which they will want to take when this is over or be entitled to be paid if their employment is later terminated.
Note: the government has introduced temporary legislation which allows employees to carry over their statutory leave (4 weeks) into the 2 leave years immediately following the leave year in respect of which it was due. However, this is only available if it was not reasonably practicable to take some or all of their 4 weeks basic holiday entitlement as a result of the effects of coronavirus.
Temporary Pay Reduction
Whilst employees have been on furlough they may have only been paid 80% of their normal salary. It is possible to consult with employees now to agree to a temporary reduction in pay when they return from furlough, for say 3 – 6 months, and then for this to be reviewed. This is likely to be more palatable if this is applied to all employees, including senior management. This will be a temporary variation to their terms and conditions of employment so must be done with their agreement. If it is forced on the employee then they may have a claim for unlawful deduction from wages and/or constructive dismissal (subject to eligibility).
Short Time Working
Perhaps a more attractive option to a pay reduction is for employees to agree to temporary short time working. This is when an employee agrees to a temporary reduction in their contractual hours which in turn reduces their pay on a pro rata basis, so for example, an employer could propose an employee agrees to a 4 day week and in turn is then paid 80% of their salary.
The first step is to see if there is a contractual right to do so. If not, and I suspect most contracts do not, then it is to obtain their agreement through consultation.
Employees may be eligible to a guaranteed payment (maximum daily guarantee payment is £30) for ‘workless’ days so you should take advice before beginning this process.
Temporary Lay Off
If a business is struggling in the short term to have sufficient work and/or cash flow to allow employees to return to work after the CJRS ends then another option is to agree with the employee a temporary unpaid lay off. This means that an employee will agree not to work and not be paid for a period of time but remain employed by the business. If at the end of this period redundancies cannot be avoided then, subject to eligibility, the employee would still be entitled to notice pay, accrued holiday pay and statutory redundancy pay at their normal rate of pay.
This is only a short term solution and should not be seen as a way to avoid paying redundancy pay. If an employee has been ‘laid off’ for more than 4 weeks in a row or 6 weeks in a 13 week period then they can apply for redundancy and claim redundancy pay.
Again, employees may be eligible to a guaranteed payment (maximum daily guarantee payment is £30) for ‘workless’ days so you should take advice before beginning this process.
Voluntary Redundancy (VR)
Whilst this is not avoiding redundancies it is avoiding compulsory redundancies. COVID 19 may have caused some employees to re-evaluate their life goals and career options and VR may provide them with the welcome opportunity to explore these. Usually an employer will offer an ‘enhanced redundancy payment’ to encourage volunteers to come forward. Of course, you want to ensure you retain your best people so any VR should be an application process and the employer has the right to say no.
Regrettably, it may be that the above steps are not sufficient and a business may have to reduce headcount and make redundancies. For the purposes of an entitlement to a statutory redundancy payment and a fair dismissal an employee is dismissed by reason of redundancy if:
1. The employer ceases carrying on the business in which the employee worked;
2. The employer ceases carrying on the business in the place in which the employee worker; or
3. The business needs fewer people to carry out the work of a particular kind.
Prior to any dismissal an employer should consult with employees; if 20 or more employees are being made redundant in one establishment then it will trigger collective consultation and will require a minimum consultation period of 30 days (45 days where 100 or more employees are being made redundant). A failure to carry out a fair consultation process or collective consultation may result in an unfair dismissal claim.
Planning and consultation should begin now if redundancy is an option. Upon termination employees will be entitled to contractual notice pay, accrued holiday pay and, for those with over 2 years continuous service a statutory redundancy payment.
Whilst there is enormous uncertainty with what lies ahead, businesses should use this time wisely and try to plan for the months ahead.
If employers keep their furloughed employees in meaningful employment up to the 31 January 2021 then they will be able to claim a Job Retention Bonus of £1,000 for each employee provided that employee earned at least £520 per month on average between 1 November 2020 and 31 January 2021.
Employment law continues to apply in all cases so employees should be treated fairly and without discrimination.
If you would like to discuss your plan to save costs then please contact Paula Stuart on 07887 998799 who can explore the options with you and advise on the process to be followed.