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Jun 3rd, 2020

Kate Hindmarch, Consultant Solicitor

Many businesses have furloughed people in good faith, but will have suffered more than they predicted and will not return in the same condition. As we emerge from lockdown they will face difficult decisions about how to structure themselves, particularly with the furlough scheme closing at the end of October.

On 29 May, the Chancellor announced the final financial aid available under the Coronavirus Job Retention Scheme (CJRS):

  • 10 June 2020 will be the last day that employers can place employees on furlough.
  • From 1 July, 'flexible furlough' is being introduced, meaning employees will be able to work part-time and be furloughed part-time.  Businesses will decide how that will work (in terms of the time split).
  • From 1 August, employers will have to pay employee's national insurance contributions and pension contributions, and can no longer reclaim them through the CJRS.
  • From 1 September, the government will only reimburse 70% of salary (up to a maximum of £2,190). Employers are required to top-up to 80% (or more, depending on what the employer agreed with the employee).
  • From 1 October, the government will only reimburse 60% of salary (up to a maximum of £1,875), and employers will continue having to top up to 80% (or more).
  • The furlough scheme will close on 31 October 2020.

The furlough scheme has been a lifeline for many businesses. It gave them time to plan and look ahead without the added pressures of restructuring as soon as the pandemic hit in March.

However, it has become increasingly clear that businesses cannot operate in exactly the same way as before.  Many will be considering what the future of the business will look like and what shape the workforce should take to meet their projections.  Unfortunately, most businesses are predicting difficult times ahead and will need fewer employees.

Where employers are proposing to dismiss fewer than 20 employees then individual consultation will need to take place.  Best practice is three consultation meeting over two weeks depending on circumstances.

Where employers are proposing to dismiss more than 20 employees then collective consultation obligations will apply.  These include consulting with employee representatives about the proposed redundancies with a view to agreeing the numbers to be made redundant, method to selections and ways to avoid redundancies.  Employers will also need to consult with the individuals before serving notice of dismissal.

Here are five things to consider if you’re planning to restructure:

1.    Look ahead at least 12-18 months as you consider the likely performance of the business and, consequently, how many employees you will need.
2.    If you are proposing to make fewer than 20 people redundant then individual consultations will need to take place, ideally three over two weeks.
3.    If you are proposing to make more than 20 people redundant, then you will need to follow collective consultations, including consulting with employee representatives.
4.    Ensure that any selection criteria you use to select individuals for redundancy are not based on availability (such as shielding employees or those who have childcare responsibilities) – this is likely to be discriminatory.
5.    Consultation can take place whilst employees are still on furlough, but these may prove challenging for some employees due to technology.  You must ensure that the consultation is meaningful despite the pandemic context.

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Kate Hindmarch

Consultant Solicitor

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