We are struggling badly with having most of our staff on furlough. We have just heard that one of our major customers has gone into administration, so we are now looking at reducing our workforce by up to 50%.

We have emailed the people on furlough to say that in the circumstances there will be major redundancies (at least 20), and we will notify them individually in the next few days who will be going, and that they will be gone the moment furlough ends.

Peter replies:

Employment law has not stopped being applicable during the current crisis.

The Furlough, or Job Retention Scheme, is designed to avoid unnecessary redundancies which are caused by the Coronavirus pandemic. It does not say you cannot initiate, or continue to implement, redundancies, and it also says that when furlough ends, you may have to make redundancies. Part of the reason to the Government’s decision to extend the furlough scheme, from the end of May to the end of June, was that some employers need to reduce costs substantially so are looking to initiate large scale redundancies, which requires 45 days redundancy consultation prior to furloughing ending.

There may be good reasons for initiating redundancies:

  1. You cannot keep it quiet, so it is best to be honest with people and get on with it, this fits with the legal principle that you should start as soon as possible.
  2. You cannot wait, as you do not want to be lumbered with cost of employing people after the furloughing scheme ends.

There are at least three good reasons why you may want to wait:

  1. The business situation may improve.
  2. You cannot do redundancy consultations very easily as they are at home, so you cannot just ask people to come up to the office.
  3. There is an argument that requiring people to attend work (redundancy) meetings, even if done virtually, is breaking their furlough period.

Whenever you decide to initiate the redundancy process, the first thing you must do is to consult the potentially affected staff, explaining which areas are at risk, and consequently, which pools for selection you have identified. As there are more than 20 jobs at risk, you need to allow at least 30 days for the redundancy consultation period, and you must advise the Government Redundancy Payments Service of your intention. With these people being on furlough, there will be practical difficulties in doing genuine consultation that you must address through video conferencing, so it can be done.

The key issue about consultation is not primarily legal, but one of good interaction with your employees, and a relatively open mind about solutions. You never know, they may suggest a substantial pay cut, or reduced working hours/pay, and these options need careful evaluation. The big trap to avoid is a closed mind about which individuals must go. You need to consider whether you are going to ask for volunteers, and which selection criteria you propose to use. Selection criteria must be as objective as possible, and most importantly, MUST be shared with the affected staff so they can raise any objections, or make you aware of any personal issues that will adversely impact their score, e.g. a disability that you are not aware of, or haven’t thought about thoroughly. You must not just draw up your ‘hit list’ and then justify it.

Timing is a complex issue, but at the very least, you should seek to ensure that you make the most of the furlough scheme so that people are not without some income during lockdown.

The main thing that needs to be done with redundancies is to treat people in a fair and sensitive manner. They need to retain their dignity, which can be particularly difficult, if they have been selected.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.