Post-furlough redundancies | What are the alternatives?
Written on 15 October 2021
On 1 October, the UK’s COVID-19 furlough scheme was officially withdrawn after nearly two years of operation.
While the connotations of this are largely positive – indicating a return to strength for much of the country’s industry – it will invariably bring about a degree of financial hardship for many businesses and, with nearly 1 million employees expected to still be on the scheme as it closed, a consequent wave of redundancies.
In fact, a survey of 250 firms conducted prior to the end of the scheme found that one in five planned to make redundancies as a direct result of the withdrawal.
However, for many employers, what appears to be the inevitable could perhaps be avoided. Here’s our guide to what alternative avenues may be available for organisations facing a wave of staff cuts, and what you need to know legally about each option.
Withdrawing job offers
One potential option for businesses in this scenario may be to prioritise returning staff over pending new hires.
Though this will invariably still result in the loss of talent, it undoubtedly makes sense to favour longer-term staff. Not only will they be more au fait with the businesses and require little to no onboarding, but making an employee redundant is likely to be a much more legally challenging process.
However, employers must also exercise caution when retracting job offers, as this can also be legally risky. Under the Equality Act 2010, discrimination can potentially occur at any stage of the recruitment process, including during the interview and selection phase. With that in mind, things like protected characteristics should be taken into account throughout.
Documentation plays a crucial role here. It’s important to keep a paper audit trail, as this will help you to evidence your decision making and demonstrate the non-discriminatory nature of your recruitment practices should you need to defend your position later.
This will be most significant when it comes to the reason for retracting the offer (in this case, unforeseen financial difficulties caused by the withdrawal of the furlough scheme). All documentation and relevant evidence must be kept in this scenario.
You should also check the terms of the contract. Once an employee has agreed to join, the notice provisions in a contract can sometimes still apply even if they haven’t started employment yet.
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Terminating temporary staff
Removing contractors or temporary workers may be another viable and, crucially, simple method of cutting back on overheads in order to reinstate furloughed staff.
Due to the fluid nature of temporary employment, this method naturally removes the friction of removing permanent employees who are bound by a traditional contract of employment.
As a result, core elements of a typical redundancy process, such as consultation, appeals and redundancy pay, are all bypassed.
Whilst there is no requirement to give statutory notice to a worker, temporary contracts of this nature do sometimes contain notice provisions, so please check, and honour, any such terms before terminating the relationship.
In some cases, it may not be imperative for employers to cut down on overall staff levels to facilitate the return of furloughed employees.
For instance, it may be the case that there are vacancies in other areas of the business, and that those vacancies can be occupied by existing employees in order to free up space for those who have been on furlough.
This could be a particularly convenient option, as employers are already required to explore ‘suitable alternative’ employment as part of a fair redundancy process.
However, as always, it will be important to understand what the employees’ rights are in order to reduce potential legal risks.
In brief, if the employer:
- Offers ‘suitable alternative’ employment and it is accepted, the employee moves seamlessly into the new role;
- Offers ‘suitable alternative’ employment and it is reasonably refused, the employee will be made redundant and entitled to statutory redundancy pay;
- Offers ‘suitable alternative’ employment and it is unreasonably refused by an employee facing redundancy, the employee will forfeit their right to redundancy pay.
Making adjustments to employee contracts could be a viable way to facilitate the return of furloughed staff without permanently or temporarily reducing the size of your workforce.
The simplest way to bring about this change is via agreement with the workforce. If a reduction in pay is presented as a genuine alternative to redundancies, you may well get a great deal of acceptance from your employees.
If they don’t agree, you can then opt for dismissal and re-engagement (so-called ‘fire and rehire’) on new terms, with the lower rate of pay included. In this instance, the employer is required to:
- Show that there is a genuine business case for the change (financial strain due to COVID-19 would qualify);
- Demonstrate that they have only used this as a last resort; and
- Follow a fair procedure before providing notice of dismissal.
Note that while employment would continue in these circumstances, the employee has still been dismissed, meaning it is open to them to bring an unfair dismissal claim. Employers can attempt to defend such claims on the basis that the dismissal was fair for “some other substantial reason”, i.e. to bring about a necessary change in terms and conditions, but given the risks involved, it’s always safest to seek specialist advice before going down this route.
If none of these options work for you, you could also consider putting a freeze on voluntary overtime, reviewing your employee benefits, and short-time working (if the employee’s contract permits) to cut down on costs.
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