The question of whether to furlough staff or make them redundant is worrying and confusing for both businesses and employees alike. Due to the economic impact of the coronavirus, the government introduced a system that helped employers to keep staff during the outbreak.
The system aims to reduce the need to make employees redundant whilst taking pressure off employers by the government subsidising wages in full in many cases, or up to 80% of the maximum of over £2,500 per month.
The system is called the Coronavirus Job Retention Scheme. One of the options available to employers is to furlough staff rather then make them redundant or fire them.
Who is Covered?
The system is aimed at covering the following staff if you are paid by PAYE, or pay as you earn:
- Salaried members of limited liability partnerships (LLP)
- Full-time employees
- Part-time employees
- Agency contracts
- Flexible or zero-hour contracts
- company directors and other office holders
- Agency workers (umbrella companies are also included)
- Limb workers
Why Would My Employer Make Place Me on Furlough Rather Than Making Me Redundant?
The furlough system allows your employer to backdate your furlough leave to the 1 March 2020. This reduces the likelihood that an employer will make you redundant.
As an employer, you can put employees on furlough leave for at least three months.
Furlough leave might be available for a longer period subject to the government’s decision and your employer would then be able to extend an employees furlough leave if necessary.
The new system is expected to be up and running by the end of April 2020.
Redundancy or Furlough Leave?
In terms of advice from our employment solicitors in Brighton and Hove, it is difficult to know if the Employment Tribunal will find a dismissal to be unfair when there is the option to furlough an employee instead.
There is a well know test in employment law for reasonableness. It is found under the Employment Rights Act at section 98(4). This section considers the circumstances of each case. Our employment solicitors have advise that factors such as:
- Size of company
- The company’s financial position
- If the decision was before or after the system had commenced
- Company resources – such as reserves, and
- Options available
Would impact heavily on the employment tribunals decision. An employer may be in a position where they cannot afford to furlough its employees and pay 80% of salaries until Her Majesty’s Revenue and Customs are able to reimburse the company.
What our Employment Solicitors say:
Firstly, our employment solicitors in Brighton and Hove would write to an employer and request that the employee is furloughed with immediate effect or if it is possible to backdated to 1 March 2020.
We would then write to any employer and ask for the employee’s pay to be deferred until the company is reimbursed by HMRC. This would be a reasonable offer from an employee and make it more difficult and riskier for an employer to make an employee redundant.
However, some employees will be unwilling to agree to this because they are not in a good financial situation to wait. If that is the case, then it may be fair for an employer to dismiss an employee on grounds of redundancy.
This is an emerging area of employment law that our employment solicitors are reviewing regularly.
Our employment solicitors can also review redundancy packages and give independent legal advice.