Redundancy for furloughed employees

We explain everything you need to know about the rules around furlough and redundancy

First published on Tuesday, Apr 27, 2021

Last updated on Tuesday, Jun 25, 2024

Many businesses have faced financial difficulties because of the COVID-19 pandemic.

One scheme put in place to help with business money worries was the Coronavirus Job Retention Scheme - also known as the furlough scheme.

The furlough scheme allowed employers to claim 80% of wages for selected employees, providing they don’t complete any work for you in the period they’re furloughed.

Many businesses have made use of the scheme and it’s helped to protect jobs. However, many others have still had to make difficult staff decisions and with the scheme set to stop at the end of September, there could be many more redundancies over the next few months.

In this guide, we’ll cover the rules around furlough and redundancy, including the selection process, notice periods and redundancy pay.

Redundancy and furlough

The aim of the furlough scheme was to prevent job losses, but that won’t always be possible, and you may have to make redundancies.

You can make a furlough redundancy, but you must follow a fair process.

Your staff are still employed by you even if they can’t work for you while furloughed. This means you must follow the usual rules when making a redundancy during furlough.

When making redundancies you must:

  • Create a business case explaining why you need to make redundancies.
  • Consider alternative options.
  • Select employees for redundancy.
  • Hold a consultation with staff facing redundancy.
  • Finalise the process.

Furloughed workers may be the obvious pick for redundancies, as you have had to find a way to work without them while they’re furloughed. But you can’t make an employee redundant because they were furloughed. This is due to the different reasons an employee could be furloughed.

For example, an employee that is classed as clinically vulnerable would have been asked to shield until those restrictions were recently lifted and if they can’t work from home, furloughing them might be the only option.

Announcing their redundancy after furlough could be seen as discriminatory and you could face unfair dismissal claims.

Redundancy consultation

The consultation is a vital part of the redundancy process. This is when you meet with the employees that have been chosen for redundancy and allow them to ask any questions.

If you are making fewer than 20 redundancies, there are no rules about the format of the consultation.

For 20 or more redundancies, you must follow the collective redundancy rules.

A collective redundancy consultation should take place between the employer and either a trade representative or appointed employee rep.

Collective consultations must also cover:

  • Ways to avoid redundancies.
  • The reasons for redundancies.
  • How to reduce the number of dismissals.
  • How to limit the effects for employees involved, for example with training.

Redundancy notice during furlough

When you make someone redundant, they don’t immediately stop being employed by you. Your employees are entitled to a notice period.

There’s a statutory notice period for redundancies that differs depending on the length of service. This is the same for employees made redundant on furlough.

For workers with less than two years of continuous service, the minimum notice period is one week.

For employees who have been with you for more than two years continuously, they’re entitled to one week for each full year, up to twelve weeks.

While you only need to pay 80% of wages to furloughed employees, you must pay the full rate of pay to employees during their notice period.

If the individual’s notice period is at least a week longer than the statutory minimum, employer were able to claim 80% of that from the Coronavirus Job Retention Scheme until 31st November 2020.

Changes to the scheme meant that a claim can’t be made for any days on or after 1st December 2020.

Redundancy pay during furlough

An employee who is made redundant during furlough and is entitled to redundancy pay, should receive redundancy pay based on their normal wage. This was confirmed by a law put in place in July 2020.

However, unlike the notice period, workers only become eligible for redundancy payments after two years of service.

For workers without fixed hours or pay, statuatory redundancy pay should be calculated based on the last twelve week period before they were furloughed.

Get help with furlough today with BrightHR

Many people hadn’t had to think about furloughing staff before the pandemic. And it can be hard to have a fair redundancy selection process with all of your staff working in different capacities and different locations.

BrightHR can help you to keep on top of where all of your people are. Our furlough navigator tool lets you easily see which employees are furloughed and lets you make changes with the click of a button.

Book in a free demo today to see just how easy it is to manage HR with our app. Give us a call on 0800 783 2806.

Lucy Cobb

Employment Law Specialist

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