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Arcadia Group, owner of Topshop, has been in the press recently for incorrectly paying notice and redundancy pay. According to reports, the Group had calculated the redundancy pay of numerous employees based on their furlough salaries, rather than their full pay.
It is now well established that employees can be made redundant whilst on furlough or after the end of a period of furlough. The employee’s redundancy rights will not be affected by being furloughed. This means that the correct consultation procedures must be followed and fair processes implemented as normal. It is also possible to consult with employees and their Trade Union representatives regarding potential redundancies, without breaching the furlough rules.
On 31 July 2020, new legislation was released which stated that redundancy payments should be calculated on the basis of employees’ original pay, rather than their reduced furlough rate. It is reported that Arcadia Group has already fallen foul of this legislation and so it is important that employers are aware of all the rules which apply throughout a redundancy process, particularly in light of the Coronavirus Job Retention Scheme (“CJRS”).
Employers cannot claim reimbursement for redundancy payments (whether statutory or contractual) under the CJRS. However, they can claim back an employee’s notice pay under the CJRS. This applies to both statutory and contractual notice pay, but not to payments in lieu of notice.
There has been some criticism levied at this approach. Some, including Aviation Minister Kelly Tolhurst, have said that the scheme should not be used as a way to pay for employees’ wages who are serving notice. However, there is no indication that the Government will change its stance on this, particularly now that the CJRS is into its final two months.
The fairness of redundancy dismissals which have followed a period of furlough is, as yet, largely untested in the Employment Tribunal. Claims which emerge over the coming months will gradually reveal the Tribunal’s approach to such issues. However, it goes without saying that normal principles of process and fairness will continue to apply. As in any redundancy situation, the Tribunal will take into consideration the resources available to, and financial position of, the employer. Therefore, those employers who have not have been able to wait for the CJRS to end before making redundancies will not be automatically penalised. That being said, a redundancy selection pool which comprises only furloughed employees is likely to be subject to scrutiny.
Where a large number of staff are on furlough, the practicalities of the consultation process will be more complex. Employers should consider the most appropriate way of doing this, whether it be via video call or in person, whilst adhering to social distancing rules. Employers should ensure that employees have the appropriate technology to attend virtual meetings before they arrange video calls. As with consultations prior to the CJRS, employees should still be given the chance to be accompanied to consultation meetings, even when carried out remotely. Employers should also consider how they will enable employees to contact representatives and generally stay in touch with them.
With the Government gradually reducing its contributions before the end of the CJRS, many businesses will face some difficult decisions. Whether that is the commencement of redundancy processes, or a consultation regarding the change to terms and conditions, all will require some careful planning and adherence to the usual employment legislation, in addition to any COVID specific guidance.
This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Rachael Lloyd to discuss any issues you are facing.
