Redundancy during COVID-19
25 June 2020
This guide provides information on planning, the redundancy process and support for employers and employees.
This page was updated on 6 January 2021.
The impact of COVID-19 on staffing is huge and has a number of implications. Many workplaces have been able to preserve their workforce, however, it may be that due to business viability employers might have to consider redundancy.
For businesses at this stage, it is important to start planning and maintain open communication.
Consider your options
Have you considered all other options as an employer, reviewing what you can do as a business to save costs and reduce redundancies?
If redundancies are contemplated, businesses might first want to consider whether these could potentially be avoided by, for example, imposing a recruitment freeze, reducing spend on use of agency workers or looking into contract changes such as proposed pay cuts, and reduced working days or hours.Laura D'Arcy, a Partner at BLM Law
Here we list options to be considered prior to redundancy:
- Coronavirus Job Retention Scheme - The scheme closed on 30 September 2021.
- Time bank of hours – Time banking hours allows an employee to reduce hours when demand is low and then work these hours when work when demand is higher. This allows for fluctuations in workload. In order to do this, a business would need to have cash flow available to continue to pay staff and enable this flexibility.
- Temporary layoff – For more information you can visit the UK Government guidance here.
- Use of annual leave – Employers can allow employees to use annual leave at this time to alleviate pressure when they need to cover childcare or also enable them to be available when business needs arise.
- Unpaid leave – Employees can take unpaid leave however this would have a financial implication for individuals. Allowing an employee to take unpaid leave still retains them as an employee and enables them to still be protected under employment rights
- Flexible leave – A sabbatical could be on either an unpaid or a part-pay basis (e.g. a percentage of basic pay). Realistically, the employer would also have to accept that employees on sabbaticals (especially if they are unpaid) might wish to take up temporary employment elsewhere.
- Reduction in hours – A reduction in hours would need to be in consultation with employees as such change cannot be completed lawfully without the full co-operation of employees. One of the common ways for employers to reduce costs in difficult times is to ask staff to agree to reduced days or hours and a proportionate reduction in pay.
Other areas you may need to consider:
- Other cost cutting areas – Have you considered all areas for cutting costs that are non-staff related?
- Invite staff to make suggestions for cutting costs – Would they be willing to take a temporary pay cut rather than seeing people lose their jobs?
- Government support – Have you explored all areas of government support such as grants, business rates relief and loans. You can find more information on our Coronavirus Finance page.
Even if you are not at the stage to make redundancies, it is key to keep staff informed at all times. Consultation is useful as the workforce may have valuable ideas about cutting costs and is obligatory if redundancies become necessary after all. At the very least, the employer should notify employees that it needs to make costs savings, the reasons for this and the initiatives that it is considering.
If you have no other option than making a position redundant then please look at the following resources which cover the steps to be followed when making an employee redundant:
Redundancy due to Covid-19
The Chartered Institute of Personnel and Development (CIPD) has produced an informative guide on Covid-19 Redundancy which highlights questions such as:
- Logistical – There should be consideration around how to communicate and consult with employees on redundancy when many may be working remotely or on furlough.
- Ensuring selection criteria is fair – Don’t assume that those furloughed employees are automatically placed for redundancy
- Pay – Employees are entitled to full redundancy pay, including those who have been on furlough at 80% pay.
- Unfair Dismissal – It is important to consider if an employee can be kept on furlough as long as possible rather than redundancy
Steps to take
As Adam Haines, a Partner at Knights plc, explains:
It is imperative that the business can show that there is a genuine redundancy scenario, a clear business rationale for restructuring or closing the workplace and follows a fair redundancy process. The redundancy process is relatively rigid, and it comprises of a number of steps.
Keep in mind it takes on average 3 - 4 weeks to conduct a straightforward redundancy process and there is a Consultation Process to be followed. It is important to note that during this time if some employees who need to be consulted are on furlough this may need to be done virtually. An employee is entitled to have a representative and employers should take necessary steps to ensure this is possible even if the meeting is being delivered virtually. Further points to consider include:
- whether you are obligated to collectively consult with a trade union;
- whether you are bound by the terms of a redundancy policy;
- whether it is a large-scale redundancy process of 20 or more employees, which will require at least a 30 days consultation period;
- the duration of each employees’ contractual notice period; and
- the financial cost of the redundancy, notice and accrued holiday pay.
For more information on the process of redundancy visit resources from CIPD and ACAS.
Employers must ensure that selection criteria are fair, objective and reasonable and that staff are consulted about them. It is important that the criteria are not just based on those staff who are furloughed, this is because the criteria for furlough may not have been initially based on reasonable selection.
It is important that employees are aware of their rights during the redundancy process, the Government website clearly sets out an employee’s rights during this time. An employer must also look at options for redeployment or support available for staff.
Adam Haines, Partner at Knights plc advises:
Ensure there is a support mechanism in place to assist employees, either a delegated point of contact or perhaps independent support such as counselling for the employees.
Further to this, the National Careers Service is a useful resource for employees if they are being made redundant. Redundancy factsheets with information for employees are also available through the Department for Work and Pensions and the Insolvency Service.
To help businesses understand the different support measures available, the People, Skills and Talent team is here to provide free, impartial support. Get in touch on: 0161 237 4128 or email us at BGH@growthco.uk. The team can also connect you to our partners for legal guidance. Furthermore, navigating the current financial landscape can be challenging. If you are based in Greater Manchester or Lancashire and need bespoke financial support, our Access to Finance team is here to offer free and impartial guidance.
Employee Support Services
If you have been made redundant, our
Employ GM service connects employers who have urgent temporary vacancies with
individuals across Greater Manchester.
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If you are worried about your employment, whether that’s your rights, redundancy, pay cuts, terms or disputes our new service can help you access free employment-related legal support
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More information is available on the UK Government’s Coronavirus Business Support website. For more personalised advice call us on: 0161 237 4128 or email us at: BGH@growthco.uk
The information provided is meant as a general guide only rather than advice or assurance. GC Business Growth Hub does not guarantee the accuracy or completeness of this information and professional guidance should be sought on all aspects of business planning and responses to the coronavirus. Use of this guide and toolkit are entirely at the risk of the user. Any hyperlinks from this document are to external resources not connected to the GC Business Growth Hub and The Growth Company is not responsible for the content within any hyperlinked site.