As the Furlough Scheme changes, what next?

As restrictions ease, workplaces begin to open up again and with the winding up of the Coronavirus Job retention Scheme (which ends on 31st October 2020) many businesses are now having to turn their minds to considering various options to help keep their businesses profitable and on track.

The flexible furlough scheme has proved to be a lifeline for businesses small and large across the country. The introduction of flexible furlough, which has been available since 1 July 2020, enables businesses to bring back employees from (full) furlough or to place employees back on furlough. Employees can return to the workplace adopting any shift pattern. For the remainder of the time that employees are not needed to work, businesses are able to furlough the employees on a part-time basis and reclaim the costs for the furloughed period from the CJRS.

We have seen the devastating impact of Covid-19 on businesses and the wider economy and whilst the scheme and its flexibility has provided much needed financial assistance to many businesses, for others it is simply not enough to ensure their long term viability. It is a sad fact that as a result of the pandemic some businesses will not survive.

In terms of the options to businesses going forward, many will need to re-organise, some will want to consider implementing pay cuts across the board for existing staff or perhaps a reduction of hours, whilst some will need to reduce staff numbers by way of redundancies or settlement agreements. 

Redundancies

Where businesses are looking to make employees redundant, they will need to make sure that they follow a fair redundancy process. This involves the requirement for a genuine redundancy situation to exist, businesses adopting and applying fair and objective selective criteria to determine the employees that are to be provisionally selected for redundancy and finally, businesses will need to engage with those ‘at risk’ in a genuine and proper consultation process to enable employees to put forward proposals and ideas as a means to avoiding their redundancy.

Businesses also need to take into account suitable alternative employment options and any other vacancies that might be available within the company and any wider group of associated companies.

Finally, employers will need to give employees who have been given notice of redundancy the right to appeal the decision that their role has been made redundant. Where businesses fail to follow a fair redundancy process, they face the risk of the employee pursuing an unfair dismissal claim in the employment tribunal against the company. It is therefore vital that businesses take appropriate legal advice in respect of the redundancy process prior to making any decisions so that they can minimise the risk of claims.

Changes to Terms and Condition

Businesses need to be aware of making changes to the terms and conditions of an employees’ contract and what constitutes a variation.  Where businesses are looking to do this, where the contract does not allow the change, usually the easiest and safest route to change an employee’s terms and conditions is to consult with them and ultimately, secure their agreement to those changes within the consultation process. Where agreement cannot be obtained, then a process may need to be undertaken whereby an employee is dismissed and then immediately re-engaged on newly proposed terms of employment.   It is important that companies are following the appropriate employment law processes prior to imposing any changes to terms and conditions of their employees’ employment.

Where employers are potentially looking at proposed redundancies or terminations affecting 20 or more employees at one establishment within a 90 day period, collective consultation will be required.  Legal advice should therefore be sought in connection with ensuring compliance with collective consultation obligations.    

Settlement Agreements

Using a settlement agreement is a way of bringing someone’s employment to an end safely and with minimal risk.

In light of the strict process that must be followed in order to make an employee redundant and/or change their terms and conditions of employment, many employers are opting to use the settlement approach, which involves making a without prejudice proposal to selected employees the effect of which will bring their employment to an end via a legally binding settlement agreement. In many cases, employers may look to offer voluntary redundancy prior to commencing any compulsory redundancy process and this is often a good time for businesses to approach employees and offer to pay them an enhanced package in return for the safety of a signed settlement agreement which waives the employee’s right to pursue any claims in the employment tribunal.

Alternatively, some employers may opt to approach employees at the latter stages of the redundancy procedure and at the point of which they are serving the employee with notice to terminate their employment. Again, at this point, an employer can offer an enhanced redundancy package in return for the employee signing away their employment rights within a settlement agreement. An advantage of entering into a settlement agreement also includes the ability to re-state any existing restrictive covenants within the employee’s contract of employment and/or ensure that a strict and tightly worded confidentiality clause is included. Employees will, however, be required to obtain independent legal advice upon the terms of the settlement agreement.

Sarah Collier

All of the above requires careful consideration and planning to ensure you comply with employment legislation and avoid costly tribunals.

Should you require any assistance in relation to next any of the issues outlined within this article, including any redundancy process or any assistance with drafting settlement agreements, then please do not hesitate to contact Sarah Collier, Partner and Head of Employment at KBL Solicitors LLP

Tel: 01254 268790 / 01204 527777 or email scollier@kbl.co.uk

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