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Alternatives to redundancy in a post-furlough world: A Q&A for employers

6 July, 2020

Now that the arrangements for the end of the Coronavirus Job Retention Scheme (or furlough scheme as it has become known) have been published, it is focusing employers’ minds on their post-lockdown staffing needs. In many cases, this means considering redundancies.

However, given the downsides that redundancies can bring for the employer, in terms of loss of skills and experience and the effect on morale of the remaining employees, many employers are looking at alternative ways of avoiding, or at least reducing, the number of redundancies, something that they are in any event bound to at least consider if they want to avoid unfair dismissal claims.

This Q&A takes a look at some of the most commonly asked questions….

What are the alternatives to making redundancies?

There are in theory few limits on the alternatives that can be proposed, albeit that it is sensible to propose those which both achieve commercial and operational objectives as well as being likely to have some appeal to the demographic of the employer’s workforce.

Possible alternatives to redundancy include the following:

  • Extending furlough leave beyond the end of the government scheme on 31 October 2020 in return for reduced pay funded entirely by the employer
  • Reducing working hours/offering more flexible working across affected roles or departments
  • Job sharing
  • Business wide pay-cuts
  • Pay freezes
  • Removing bonus payments
  • Removing overtime
  • Offering sabbaticals – whether paid or unpaid

Download our Coronavirus Job Retention Scheme – Key Dates document here.

Are employees likely to agree to these sorts of alternatives to redundancy?

There will always be some, particularly those with long service, who might be entitled to a reasonable sum on redundancy or who don’t rely upon their income for living costs, who would prefer to be made redundant.

However, the enormity of the impact of Covid-19 upon many businesses means that employees are generally more likely to be willing to consider such options than might otherwise be the case, as they know that the likely alternative is mass redundancy, and possibly difficulty securing another job. There will also be employees who would prefer to have a break from work, or work less or more flexibly while they deal with family obligations such as caring for children who cannot attend school or other family members who might need to self-isolate until the pandemic is over.

How does an employer go about making these sorts of changes?

This depends upon whether what is being proposed involves a change in terms and conditions (even a temporary one) or whether there is sufficient flexibility within the existing contract of employment to impose the change.

However, employers should proceed with caution as just because the contract authorises the employer to make a particular change, it doesn’t automatically mean that it can just go ahead and do so. Any contractual right needs to be exercised in a reasonable manner to ensure that it doesn’t breach the implied duty of trust and confidence that all employers owe to their employees.

What steps are needed if the alternative to redundancy involves a change to terms and conditions?

The best way to secure any change to terms and conditions is with the consent of the employees concerned (or where a trade union is recognised for these purposes, such changes being agreed with the union). Not only is this more straightforward, but persuading the employees of the need for the change and keeping them onside, is also likely to lead to a more loyal and productive workforce going forward, something that is going to be key in supporting the employer’s business through what are likely to be challenging conditions ahead. Any agreement to changes to terms and conditions should always be made in writing.

When looking at changes as an alternative to redundancy, it is likely to be a case of all the employees (whether across the business or the affected departments and/or roles) having to agree to the change(s) or redundancies being made.

However, if the employer is instead looking to force through the changes in relation any employees who are not willing to agree to them after due consultation, the options are either for it to:

  1. terminate the existing contracts on notice and offer re-engagement under the new terms; or
  2. impose the changes on the employees by notifying them of a specific date that they will apply from.

Both options come with risk – in particular, the first of an unfair dismissal claim, the second of employees resigning and claiming constructive unfair and/or wrongful dismissal. Unsurprisingly, the second option is much riskier than the first. However, the extent of the business need might well justify the risk of the first option, assuming the employer properly consulted the affected employees about the proposed changes and attempted to reach agreement with them first.

Are there any other considerations when considering making changes to terms and conditions?

If at any point an employer considers that it will dismiss (including making redundant) any employees who do not agree to the proposed changes and the number of dismissals or redundancies involved might be at least 20, the employer will also be obliged to comply with collective consultation obligations before effecting any dismissals in addition to consulting with the affected employees individually. Failure to do so could lead to liability for a protective award of up to 90 days’ gross pay per affected employee.

Contact us

If you would like to discuss the legal implications of your options on alternatives to redundancy with our employment law solicitors in Bournemouth, please contact Deborah West on 01202 294 566 or email deborahwest@steeleraymond.co.uk

*The information set out in this article is correct at the date of publication (06 July, 2020). The effect of coronavirus on businesses is a fast-changing area and so it is important to obtain legal advice to ensure you are properly protected. Visit our Coronavirus (COVID-19) Hub for more Leading Insights.

Excerpts from this article first appeared in Bournemouth Daily Echo.

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