Alternatives to redundancy — suggestions

In this article, Stuart Chamberlain, Croner-i author and employment law consultant, outlines alternatives to redundancy for employers such as the Government's Job Retention Scheme (“Furlough”), while managing a pandemic such as the coronavirus (Covid-19).

The impact of the coronavirus pandemic continues to be substantial, with many companies across the UK facing significant business worries. In such a situation, employers will obviously look to reduce costs, most likely through redundancies. The problem with redundancy is that it is final and potentially deprives the employer of much-needed skills and talent that may be needed once the coronavirus crisis is over.

This article looks, therefore, at some options for the employer to consider as alternatives to redundancy, including the continued use of the Government’s Job Retention Scheme. The options considered below are not intended to be exhaustive.

1. The Government's Job Retention (“Furlough”) Scheme

In March 2020, the UK Government announced sweeping fiscal measures to support businesses and employees during the Covid-19 pandemic. Employers who are experiencing a business downturn continue to be encouraged to consider these measures rather than making redundancies. The Coronavirus Job Retention Scheme (CIRS or “the Scheme”) enables UK employers to access financial support to continue paying part of the salary of those employees who would otherwise have been laid off during the Covid-19 crisis — this means made redundant or provided with no work and no pay. This works by placing staff on “furlough”, during which time that member of staff conducts no work for the company.

The Scheme has been used significantly since its inception and is due to last until the end of October, at which point it is to end. However, funding for the Scheme has recently changed, with employers being asked to start contributing to the salaries of staff they have placed on “furlough” from 1 September. For many companies, this change may likely have facilitated a decision to stop using the Scheme; however, they should bear in mind that any member of staff they have previously furloughed can be so again up until 31 October 2020.

In addition to the Scheme, the Government has recognised that its ending is likely to remove a key lifeline from businesses in preserving jobs, and to this end have also announced the Job Retention Bonus. Subject to eligibility, businesses that retain previously furloughed staff until at least 31 January 2021 will receive further funds from the Government of £1000 per employee. Further information on how to claim the bonus is set to be released later in the year.

2. The Government's Job Support Scheme

In September 2020, the UK Chancellor, Rishi Sunak, announced a replacement for the Job Retention Scheme that is due to start on 1 November 2020; the Job Support Scheme (JSS). This Scheme is intended to protect “viable” jobs in businesses which are facing lower demand over the winter months due to Covid-19. The JSS will only support those who are working fewer hours than normal, not those who are working no hours, which is a key difference to the original Job retention Scheme.

A key criterion to gain access to the JSS is a minimum level of working hours; employees must work for at least one third (33%) of their normal working hours. From here, the Government and the employer will each pay one third of pay of the hours not worked. Whilst this scheme will be open to all businesses, larger companies will need to meet certain financial requirements that will be confirmed in later government guidance.

Employees will be able to cycle on and off this scheme, meaning that you can decide to stop using it at a later date if necessary. Staff do not need to have been furloughed to benefit from this and, crucially, using the scheme will not impact upon a later claim for the Job Retention Bonus. Therefore, this is an option that you may want to consider as another alternative to redundancy, provided you feel you can meet the eligibility criteria. The Government accepts that we are on the cusp of a difficult couple of months, which is why this scheme is currently set to be available until 30 April 2021.

3. Lay-offs and short-time working

Where an employer cannot provide work to an employee, they may, as a temporary measure (where permitted by the contract of employment) lay off the employee or put them on short-time working.

Lay-off is where an employer no longer requires an employee to attend work for a temporary period. The employee will not be paid but may be entitled to a statutory Guarantee Payment — presently the maximum is £30 a day for five days in any three-month period — so a maximum of £145 with part-time entitlement being pro-rata.

The major problem with laying off staff is that the employer must have a contractual right to do it or they could face claims of constructive unfair dismissal and unauthorised deduction of wages at the employment tribunal.

A further problem is that employees who are laid off will have a right to treat themselves as dismissed by reason of redundancy (and are entitled to the associated redundancy package) if a contractual lay-off extends beyond four consecutive weeks, or beyond six weeks in any twelve-week period.

Short-time working is a similar concept to laying-off. The employer unilaterally reduces an employee's hours and pay on a temporary basis. As with lay-offs, there must be a contractual right for the employer to make the change, and, again, the employee retains the right to claim a redundancy payment once certain timescales have been reached. The employee on short-time working may also be entitled to a statutory Guarantee Payment — see above.

If you are considering either of these options, you should first check whether the Government’s Coronavirus Job Retention (CJR) Scheme (also see above) can provide any financial assistance before you commit to laying off staff.

4. Reduction of hours and pay by agreement

You could introduce a shorter working week (and, therefore, a reduction in pay) as a temporary measure. This will require consultation with the workforce and their written consent to the temporary changes.

You should make it clear during the consultation that the alternative will be redundancy. A temporary reduction in hours and pay is more likely to be accepted by your employees as an alternative to the finality of redundancy.

You are likely to face claims at the employment tribunal if you introduce such a measure unilaterally.

Another option under this heading would be to reduce or stop overtime.

5. Change to recruitment policy

There are several actions that you could take, including:

  • withdraw job offers and/or defer new starters — but remember unilaterally withdrawing a job offer that has been accepted will be a breach of contract and that deferring a new recruit’s start date will require their consent if the offer has already been accepted; however, the sums involved in payment for breach are not likely to be substantial

  • a recruitment freeze

  • reduce or stop the use of temporary staff.

6. Redeployment

You could consider redeploying those employees who have seen a recent downturn of their work. They could be redeployed to areas of the business where there is a maintained or increased workload. They may need a short period of retraining to support the redeployment.

There could also be a possibility of staff being moved to another employer on a temporary basis. The new employer would meet the salary costs.

7. Sabbaticals and unpaid leave

Some employees may welcome the opportunity for unpaid time off. You may need to pay a “sweetener” to encourage this option,

Summary

Consider the Government’s CJRS proposals and your eligibility carefully. If none of these options work, then you may have to move to redundancy — see Top 10 tips for Managing Redundancy and the Redundancy Toolkit on the Croner-i website.