How to Make a Furloughed Employee Redundant in the UK

This guide is meant to summarise the main principles and key steps of the redundancy procedure for a currently furloughed employee in the UK so you consider whether redundancy is the right option, at which point you should consult the full ACAS procedure use this redundancy payment calculator to ensure your furloughed employees receive the correct statutory redundancy payment.

ACAS provides a full detailed guide on the redundancy procedure and the link to this page can be found at the end of the e-mail.

Can I Make Furloughed Employees Redundant?

Even though the Coronavirus Job Retention Scheme was setup as an alternative to redundancy during lockdown, employers can make their furloughed employees redundant during or at the end or furlough.

Are Furloughed Employees Entitled to Redundancy Pay?

Furloughed employees have the same rights as with any normal employee who is not on furlough, including but not limited to statutory redundancy pay?

New laws brought in on the 30th July stipulate that furloughed employees should receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate. The changes will also apply to statutory notice pay and other entitlements, providing some reassurance during this difficult time.

Employers can continue to claim for a furloughed employee who is serving a statutory notice period, however grants cannot be used to substitute redundancy payments.

Furloughed employees continue to accrue leave as per their employment contract and accrued, unused leave should be reimbursed to the furloughed employee when they are made redundant as part of their severance pay.

What is a Redundancy Situation?

ACAS provides five different explanations of a redundancy situation but in its simplest terms, redundancy means that there is not enough work for one or more employees. This means that you have a surplus of employees and you may need to terminate their employment. This is a redundancy situation.

Establish a Redundancy Procedure

ACAS recommends that you follow a formal redundancy procedure when making furloughed employees redundant in your business. I also believe a formal procedure, administered correctly and thoughtfully, is the best way to handle a redundancy situation. Ideally, your business should already have a redundancy policy and this would typically be included in your employee handbook. If you do not currently have a redundancy policy, then it is recommended that you prepare one. You can purchase a redundancy procedure at the end of this document.

The Redundancy Procedure

There are several  steps that you will need to follow to effect your redundancy in the UK employment environment.

1. Try and Avoid the Redundancies

This may not always be possible, but try and look at alternatives to compulsory redundancy which include: reducing costs elsewhere in the business, making less use of freelancers, introducing a recruitment freeze, job sharing, limiting overtime or offering voluntary redundancy.

2. Declare a ‘Redundancy Situation’ and identified ‘at risk’ employees

If the redundancy situation cannot be avoided, the company should declare a ‘potential redundancy situation’ and identify those ‘at risk’. Naturally, you should attempt to keep the number staff identified as ‘at risk’ to a minimum.

If you are planning to make 20 or more employess redundant, you have additional obligations which include having a duty to inform the Secretary of State via the Department for Business Innovation and Skills (BIS), and also being required to consult representatives of any recognised independent trade union, or an elected employee representative.

3. ‘At risk’ employees must be consulted

All ‘at risk’ employees must be consulted by the employer. What does this mean? Firstly, it means that employees should be made aware of any agreed redundancy procedure which should set out the process, selection procedures, severance entitlements and calculations, etc….

They should also be informed of their rights to be consulted and that they have the opportunity to make representations during the consultation discussion. These representations would include ideas about how to avoid the dismissals, reduce the number of employees to be dismissed, and mitigate the effects of dismissals.

If you are planning to dismiss more then 20 employees, then you will also need to perform collective consultation with a trade union or employe elected representative.

4.) Selection Criteria if You Need to Select From a Pool of ‘At Risk’ staff.

If you need to select individual staff from a pool of staff identified as ‘at risk’, you will need to adopt a formal selection process using fair selection criteria. Different criteria may be used in different circumstances. These selection criteria must be objective and could include things like: Disciplinary record, Qualifications, Job performance/quality of work, Appraisal data, Time-keeping/absence record.

If you need to manage a selection redundancy process why not try our Automated Redundancy Selection and Scoring Matrix UK ; Excel Based

5.) Severance Pay

Staff who have at least two years’ continuous service qualify for a statutory redundancy payment, if selected for  redundancy. The amount that each employee is entitled to will be based on their weekly pay, age and continuous employment with your employer.

New laws brought in on the 30th July stipulate that furloughed employees should receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate. The changes will also apply to statutory notice pay and other entitlements, providing some reassurance during this difficult time

Also, staff who are being dismissed by reason of redundancy are entitled to the notice period stated in their contract of employment, or statutory notice if this is higher.

If you are need help in calculating the statutory  redundancy pay for your employees then why not try out our Excel-Based, UK Statutory Redundancy Pay Calculator  – Fully Automated. 

6.) Appeals Procedures
ACAS also recommends that you adopt an appeals procedure to deal with any complaints from employees who feel that selection criteria have not been applied correctly.

This is a guide on how to make a furloughed employee redundant in the UK and is presented to you for use on the condition that you seek advice from a employee relations specialist.

If you are need help in calculating the statutory  redundancy pay for your furloughed employees then why not try out our Excel-Based, UK Statutory Redundancy Pay Calculator – Fully Automated