If you are planning on the difficult decision of making a furloughed employee redundant after the scheme ends on 31 October 2020, there are several key considerations for employers.
Notice period pay
During an employee’s notice period, they are entitled to their full salary regardless of what they received while on the scheme. Remaining annual leave must also be paid, at the full rate of pay. This will be based on the amount of untaken holiday that has accrued by date of termination.
The consultation process
Due to the Government’s advice, working from home where applicable and limiting the movement of staff within the office, consultation processes may need to be done remotely. Therefore, planning will be essential to ensure furloughed employees are properly consulted.
Redundancies should be handled with compassion, dignity, respect and kindness, now more than ever with mental wellbeing at a nationwide low due to the pandemic. Income loss and concerns surrounding finding new employment have increased, so it is best to ensure the employee understands the reasons for their redundancy and that all alternatives to redundancy have been considered.
The selection criteria and process
Employers and organisations will need to consider their current redundancy selection criteria and ensure the process is fair.
Statutory pay
The Government states that an employee’s redundancy rights do not change by being on the furlough scheme. Any furloughed employees will, therefore, be entitled to a statutory redundancy payment if they have been employed continuously for two years, along with any contractual redundancy entitlement.
On 31 July, legislation came into force that requires statutory redundancy payments for furloughed employees to be based on their contractual salary.
Statutory redundancy pay is based on age and time spent at the company as follows:
- Under 22 – half a week’s wage for each full year
- Between 22 to 41 – one week’s wage for each full year
- Older than 41 – one and a half week’s wage for each full year
There is a cap for the length of service (20 years), and a weekly pay cap of £538
The maximum statutory redundancy payment is capped at £16,140. Employers can pay in excess of this but it may be in their interest to do this only if the employee agrees to sign a Settlement Agreement.
Unfair dismissals
If an employer does not follow the correct procedure or is unable to demonstrate that there is a genuine reason for the redundancy, then there could be a potential claim for unfair dismissal. For this reason, it is important to ensure the process is fair and all alternatives to avoid redundancies have been considered.
For help and advice on matters relating to redundancy, contact our expert team at today.