Whilst the Coronavirus Job Retention Scheme (CJRS) runs to 31 October 2020 and the Job Retention Bonus comes in after January 2021, employers are thinking now about what their workforce might look like in future.
This thought process will cover multiple options but may also involve notice to terminate, redundancy and changing terms and conditions. Can you keep more people in work if everyone reduces their hours and pay until things pick up? Do employees need company cars? Will employees want better life and critical illness cover? Should those, for example, who historically worked in a city but may now work from home be paid the same as they were before? What changes to workplaces and reward packages should you make?
As employers continue to grapple with these thoughts and plan their way forward, there are a few questions which come up regularly.
Reducing hours and pay of employees
This can be done with agreement. If your organisation recognises a trade union for collective bargaining purposes, you may be able to agree the change with the union. If there is an elected body of workforce representatives, agreement via that body should ease securing consent from the workforce, but you are highly likely to need individual employee consent. This should be in writing.
If there is a contractual right to impose short-time working this could be used (subject to consultation and suitable notice).
The same applies if you are trying to reduce pay but not the hours of work.
If an employee refuses to agree to the proposed change, you will need to consult individually but, if you do not secure agreement, ultimately you will need to consider if you will impose the change by dismissal and possible re-engagement on the new terms, or adopt different measures. If you have 20 or more employees for whom you need to secure the change by way of dismissal and re-engagement, collective consultation will be triggered. Care should obviously be taken.
Starting a redundancy consultation during a furlough reclaim period
Whilst there is no objection to commencing a redundancy consultation in terms of employment legal rights, most organisations are concerned about its impact on their CJRS claim and on their ability to retain any sums received. Nevertheless, employers can conduct redundancy consultations with affected employees whilst claiming the CJRS grant for reimbursement of their wages cost.
CJRS guidance has consistently stated that, 'grants cannot be used to substitute redundancy payments.' However, HMRC has confirmed that, ’you can continue to claim for a furloughed employee who is serving a statutory or contractual notice period’ and claim a grant towards that wage cost. However, ‘ grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.’
- CJRS does not change the normal rules and arrangements in respect of redundancy notice periods, or the level of pay that employees are entitled to during their redundancy notice period. These may be governed by statutory or contractual rules. However, from 31 July 2020, the Government adapted the rules on calculation of a week’s pay for the purposes of statutory notice pay and statutory redundancy pay to disregard any reduction in the salary payable as a result of an employee being furloughed.
- If the employee is entitled to more pay during their notice period than is covered by the grant, then the employer must make up any difference.
It is now clear that once an employee has been made redundant, and is no longer serving their notice period, the employer ceases to be eligible for CJRS grants for that employee. Therefore payments in lieu of notice (PILONs) and payments for accrued holiday which is untaken by the termination date cannot be claimed. Employers should not forget when making redundancy payments to consider the income tax and National Insurance contributions treatment. The rules changed in April 2018 and again in April 2020, resulting in many more termination payments being taxed in full than before.