The recession, Covid-19 & the effects on UK employment: Will redundancy rates increase when the furlough scheme ends?

With the recession caused by the pandemic reducing UK economic output by a quarter, redundancy figures are soaring. Numbers for the three months to 31 May showed the fastest increase in quarterly job losses since the global economic crisis in 2009.

A study released by the Institute for Employment Studies estimates that 445,000 redundancies could be announced between 1 July and 30 September and a further 205,000 in the final quarter of the year. This is in addition to 240,000 redundancies recorded for the first six months of the year.

With insolvencies on the rise at the same time, the cost to the public purse of the Insolvency Service for the first six months of the year was £244 million. This largely comprised payments made to individuals made redundant by employers who were unable to pay statutory redundancy pay.

The end of the furlough scheme

The furlough scheme is winding down, with government contributions dropping month on month. When the scheme was introduced in March, 80 percent of employee wages were covered. As from August, businesses were required to start paying their employees’ national insurance contributions and pensions. In September, the employer had to start paying 10 per cent of salaries on top of this, while the government contribution was lowered to 70 per cent. In October the government figure will drop again to 60 per cent, with employers paying 20 per cent. The ultimate cost to the government of the furlough scheme will be in the region of £30 billion.

Despite calls to extend the scheme, the Chancellor, Rishi Sunak, has refused, saying that it cannot continue indefinitely. The government are reluctant to prop up jobs which would end up being axed in the long run in any event.

The Federation of Small Businesses has expressed concern that there will be a huge increase in unemployment following the end of the furlough scheme. Craig Beaumont, the Federation’s chief of external affairs, told the BBC’s Today programme that one million small businesses had used the furlough scheme. When it ends, he understands that nearly a quarter of those businesses will reduce employee numbers.

Redundancy rights

If your employer is considering making redundancies, it should engage in a consultation process with the employee prior to taking the decision. If 20 or more employees are to be made redundant, the consultation must commence at least 30 days before the first dismissal, or if it is to affect 100 or more employees, then at least 45 days before.

An employee is entitled to a fair redundancy process and should be provided with relevant information, including the reason for the proposed redundancy, the length of any consultation period, which employees are being considered, how they will be selected, information about other possible roles that may be available and confirmation that the employee can appeal the decision.

The consultation may have to take place remotely during the pandemic, with meetings being held by video or phone call. No redundancies rights have changed as a result of Covid-19, and employees still have a right to be accompanied by someone, who should also be able to join the meeting.

Someone can only be made redundant if their job is no longer needed. Selection cannot be made on the basis of race, sex, gender, religion, sexual orientation, disability, pregnancy or maternity leave, trade union membership or if an employee has raised concerns about working time regulations, not being paid a minimum wage or as a whistleblower.

Making someone redundant can be a complex process and failure to get it right can result in expensive, lengthy and time-consuming legal action. It is therefore advisable to seek expert legal advice before embarking on a redundancy process to ensure that employee rights are not infringed.

Read more about your rights in redundancy, here.

Government measures and advice

The government’s Plan for Jobs 2020 is offering a bonus of £1,000 to employers who bring back a worker from furlough and keep them in employment until at least 31 January 2021.

In addition, the government has appeared to encourage a return to work in England where it is safe to do so and at the discretion of the employer. Medically vulnerable workers should carry on working at home where possible.

In Scotland, Wales and Northern Ireland, everyone should continue working at home if possible.

Travel figures released by the Office for National Statistics show that 57 percent of workers in Britain travelled to work in the past seven days, to include those who were working from home part of the time. Some 20 per cent worked exclusively from home.

Employers should put social distancing measures in place before employees return. This could include making provision for people to be 2m apart, or 1m if that is not possible, creating one-way systems, putting up screens, creating bubbles, staggering start and finish times and keeping premises well-ventilated. Government guidance entitled Working safely during coronavirus (COVID-19) gives full information on measures required. Failure to comply could expose employers to health and safety or duty of care claims from employees.

In summary

For many employers and employees, there maybe a difficult time ahead, particularly over the next few months. Businesses will be adjusting to the new circumstances and may be moving personnel and places of work to try and regain some stability.

While everyone is trying to be flexible and find solutions to widespread problems, it is important to keep standards high and avoid infringing rights. Employers have extensive duties towards employees and even in exceptional times these still remain.

Adhering to high standards will mark a business out as a good place to work and loyal employees will strive hard alongside their employers to regain lost ground. While the current climate is undoubtedly difficult for many, the economy is showing signs of recovery in most areas and by deploying flexibility and innovation, many businesses will be able to flourish in the future.

We have wide-ranging experience in property and commercial law, and were named as the ‘Commercial Disputes Specialists of the Year” in the Corporate Livewire Innovation & Excellence Awards 2020 as well as ‘Boutique Litigation Law Firm of the Year’ in both the 2019 and 2020 Global Awards by ACQ5. 

If you would like to talk to one of our expert legal team about any queries you may have regarding matters of redundancy, furlough or breach of contract during the pandemic, contact the author, Louise Paull, or call the team today on 020 3968 6030 and we’ll be happy to help.

The above information is for general guidance on your rights and responsibilities and is not legal advice. If you need more details on your rights or legal advice about what action to take, please contact a legal advisor.