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17 Jun 2021

Looking ahead: Furlough wind-down and redundancy planning

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Despite a delay to lifting COVID-19 restrictions, which means a delay to re-opening the economy in full, the current timeframe for winding-down the furlough scheme is expected to remain unchanged. This means the scheme will gradually taper before finally ending on 30 September 2021.

Furlough scheme tapering

The scheme is planned to wind-down as follows:

Furlough scheme tapering 

 
Post-furlough planning?

In light of this, some employers may be planning redundancies once the furlough scheme ends. While that may feel far away as the peak summer months lie ahead, employers should be mindful of the following important timeframes for carrying out a redundancy process.

Important notification timeframes:

  • Where an employer is proposing to dismiss 20-99 employees at one establishment within a 90 day period, notification must be received by the Secretary of State (via an HR1 form) at least 30 days before the first dismissal takes effect (in other words the date on which notice is to expire or employment is to end).

     
    If an employer wants to make its first dismissal as soon as the furlough scheme ends, the notification will need to have been received by the Secretary of State by the end of August 2021 at the latest. Please let us know if this is relevant to your plans and we can confirm the date applicable for you.

  • Where an employer is proposing to dismiss 100 or more employees at one establishment within a 90 day period, notification must be received by the Secretary of State via an HR1 form at least 45 days before the first dismissal takes effect.
     
    If an employer wants to make its first dismissal as soon as the furlough scheme ends, the notification will need to have been received by the Secretary of State by mid-August 2021 at the latest. Please let us know if this is relevant to your plans and we can confirm the date applicable for you.

Keeping in mind that summer holidays are soon upon us (when many employees are on annual leave) and the number of steps required to carry out meaningful collective consultation, employers should not leave it too late to start planning any redundancies processes that are required.

Why is notification important?

Put simply, failure to provide the notification to the Secretary of State is a criminal offence and the employer can be liable on summary conviction to a fine (which is not capped). Prosecutions can also be brought personally against a company director where the offence has been committed with their consent or connivance, or where it can be attributed to neglect on their part. 

Recently the courts have been prepared to charge directors with this offence. Criminal prosecutions were taken against company directors of City Link and Sports Direct, relating to failures to provide sufficient notice to the Secretary of State in the case of two failed businesses. Ultimately, the directors were acquitted (the court finding that they had not proposed to make redundancies at the point at which they placed the company into administration). This case reminds employers that prosecution, once considered to be a remote threat, is actually a real possibility and compliance with the timeframes are of utmost important.

Why is consultation important?

An employer may find itself footing a hefty bill if it fails to comply with its consultation obligations. A tribunal may order it to pay a “protective award” to the relevant employees for such a consultation failure. The protective award is a week’s pay for each week of a “protected period” – the length of the protected period is at the tribunal’s discretion and is subject to a 90 day maximum period. Crucially for employers, the amount of a “week’s pay” for a protective award is the actual gross weekly pay for each employee and is not subject to any statutory cap. Accordingly employers’ can face material liabilities for failing to properly consult.

When planning redundancies, employers are also reminded that employees with over two years’ service are entitled to statutory redundancy payments calculated on a formula based on age, weekly pay and the number of years in employment. There is a statutory cap on weekly pay of £544 and the maximum statutory redundancy award is capped at £16,320. Employers will also need take into account the cost of any enhanced redundancy packages they offer, over and above the statutory redundancy payment.

If you are planning redundancies and require any advice please do get in touch with Paul Reeves, Leanne Raven or your usual Stephenson Harwood contact.

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KEY CONTACT

Paul Reeves

Paul Reeves
Head of employment

T:  +44 20 7809 2916 M:  +44 7919 694 135 Email Paul | Vcard Office:  London

Leanne Raven

Leanne Raven
Senior knowledge development lawyer

T:  +44 20 7809 2560 M:  +44 7827 353 108 Email Leanne | Vcard Office:  London