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Redundancy / COVID-19 pandemic – Aug 2020

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Redundancy and the COVID-19 pandemic

The COVID-19 pandemic has presented a vast disruption to businesses and the health of staff. For many businesses, redundancies are being considered to deal with the disruptions caused. Despite the COVID-19 pandemic, the usual rules around redundancy processes still apply and businesses must ensure that redundancies are genuine, and a fair process is followed.

Businesses should consider ways to avoid redundancies during the COVID-19 pandemic. To do this, many businesses have put some or all of their employees on furlough – which allowed the business to claim financial support from HMRC. Other options to avoiding redundancies are to agree to flexible working, temporarily reduce working hours, short-term lay-offs, placing a limit on overtime, not hiring any new employees or offering voluntary redundancies or early retirement.

Where you consider that you will have to make redundancies, there is an obligation to consult staff both individually and collectively about the redundancy proposals and allow those affected to comment on the proposals before they are finalised. If your business is working remotely, you may want to consider consulting with staff via video call or in writing. If your normal practice is to allow employees the right to be accompanied then this should still apply even where the meeting is remotely or virtually. Consultations must be meaningful and you must consider any input from employees, trade unions or representatives.

The furlough scheme is due to end on 31 October 2020 and employers should consider the impact that this may have on the timeframe for a redundancy consultation period, where the business is considering making 20 or more redundancies.

Employee’s with two years’ service are entitled to statutory redundancy pay which is calculated based on the employee’s weekly pay, length of service and age. The Employment Rights (Increase of Limits) Order 2020 came into force on 6 April 2020. This increased the maximum weekly pay for statutory redundancy payment calculations from £525 to £538. The total maximum statutory redundancy pay from 6 April 2020 is £16,140. Employers are entitled to offer a redundancy payment over and above that amount. From 6 April 2020, any ex-gratia termination payment over £30,000 is taxable and subject to Class1A employer national insurance contributions.

If an employee is on furlough when a redundancy is made, their redundancy pay must be their full normal pay. Employers will not be able to reclaim the costs of statutory redundancy payments, contractual redundancy payments, payments in lieu of notice, untaken annual leave or any extra compensatory payments. However, employers are likely to be able to reclaim for the cost of notice pay for any notice period while the employee is on furlough and the cost of any annual leave taken during the notice period. These costs are subject the relevant monthly cap under the Coronavirus Job Retention Scheme.

Making redundancies can be very difficult for those involved, especially during the current unprecedented and uncertain climate. If you consider that your business may need to make any redundancies, then we recommend contacting us at FTA for advice and assistance.

If you would like any more information on anything mentioned in this article or if a situation of this kind should arise you should always seek legal advice from an Employment specialist before taking action. At FTA Law we can offer advice on all aspects of an employer’s duties towards their employees. Please contact us on 0330 088 2275 or [email protected] for further information.

The team at FTA Law provides advice to clients across the commercial and healthcare sectors with many of our instructions coming from referrals from long standing clients and industry contacts.

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