Do you need to make a member(s) of your staff redundant after furlough or generally?
There are some key things to take into consideration. If you fail to act accordingly the (to-be-made) redundant employee can make a claim against your company.
If you don't think your company can afford to make redundancies then read this page for information on how you can do it at NIL COST
What is redundancy?
Redundancy is the act of an employee losing their job as the job they do is no longer needed. It is often confused with dismissal, this also being the act of an employee losing their job but instead because of something they have done wrong – the job still remains just not with that employee.
So, when is redundancy necessary?
Cost cutting reasons i.e. resizing the company, closing certain departments or branches, perhaps due to an insolvency event such as administration or a company voluntary arrangement.
When there is no longer a need for the workers role (in some cases this can class as the role of a full-time member not being needed. however, in this case, if the role is still needed just by form of a part-time member instead, then you, as an employer must offer the part-time position to the full-timer. If the employee refuses, usually because the part-time position is not as convenient or suitable as an alternative, then the employee must be paid redundancy pay)
Full business closure, either temporary (COVID-19, refurbishment) or permanent
So, remember, it is vital to only proceed with redundancy when appropriate as it will impact the employees and your business significantly. A number of alternatives can always be looked into, if trying to cut costs; reducing overtime, freezing any increases to salary/wages, putting a halt on any further recruitment, terminating contracts of temporary or agency staff.
When redundancies are compulsory, for example, when employees need to be let go to save business costs and avoid insolvency there are certain criteria you can use to ensure the staff you choose to make redundant is fair.
- Standards of work produced
- Attendance and disciplinary records
- Length of employment/service (it is important to avoid age discrimination here)
- Skills, experience and appraisal data (be careful to avoid sex/disability discrimination)
At times, employees will self-select and volunteer to be made redundant (usually if they are close to retirement age anyway and their redundancy pay will be worthwhile). Be sure to use and previously agreed redundancy procedures made with unions if applicable too.
It is vital for you as an employer to…
- Keep the employee informed with what is happening
- Consult the employee and give an honest explanation as to why they have been selected to be made redundant. There is a period of consultation based on the amount of employees being made redundant. For between 20 and 99 employees being made redundant at once, there is a minimum obligation of 30 days and no less, to consult with employees. For anymore, this period extends to 90 days and for any less, no set amount is required.
- Look into all other options and discuss this with the employee; are there any alternative employment positions you can offer? Can they be transferred to a different department of the company? Or a different branch? Alternative employment positions must be of a similar nature.
- The three key aspects of making an employee redundant are; consultation, selection, offer alternatives.
Can I make someone redundant whilst they are on furlough?
If there is no role left for the employee then it makes no difference whether the employee has been furloughed or not. They are still an employee even if they are not actually working. However, a fair redundancy procedure means you have to consult with employees to see if it can be avoided. Normally this would mean face to face meetings which is difficult at the moment for obvious reason. Employers will need to work around this with sufficient measures such as a proper video conference with affected employees..
What rights do redundant employees have?
When dismissed due to redundancy, employees are entitled to redundancy pay, so long that;
- they are an employee of the company
- they have had at least two years of continuous service
- they have been dismissed for redundancy purposes only.
The sum of redundancy pay they will receive depends on their age at dismissal, weekly gross salary and length of service completed. Please note the Government have capped the amount to be £538 a week, with the maximum statutory redundancy pay at £16,140. Also, check the employment contract for the employee as they may have alternative arrangements noted down. For example, one months pay per year of service. If this is the case, the contract entitlement would be followed instead. In any situation, the highest amount is always paid, be it the contractual or statutory amount.
Before a staff member can be made redundant, their notice period must be served and this must be paid for. You can have more than the statutory minimum, so long it is agreed, but not less. Currently the notice periods are, at least one weeks’ notice if employed between one month and 2 years, one weeks’ notice for each year if employed between 2 and 12 years and 12 weeks’ notice if employed for 12 years+. Be aware that in some situations the employee can be paid in lieu instead, depending on their employment contract entitlements. When employees serve their notice period, allow them paid time off to look for alternative employment.
Any accrued, untaken holiday pay will need to be paid for. This is capped at £538 a week and at a maximum of six weeks. Although redundancy payments are tax-free up to £30,000, for holiday pay, both income tax and national insurance are applicable.
More about employee rights when being made redundant can be found here.
If you cannot afford to make redundancies then you are in effect insolvent. As such, you will need to act and take advice. If the business is viable, if some costs can be cut, then a company voluntary arrangement might be the best way to rescue the situation.
See the video below for more information
Categories: What is administration