Many Clients have asked what the difference between furlough, redundancy and lay off is because at different times you may want to be aware of your options.
The majority of employers are beginning to understand what furlough is and how it works. These are the important aspects of furlough. Furloughed employees:
- remain employed by you, they continue to accrue service and they continue to accrue annual leave entitlement
- must agree to any reduction in pay from their normal pay. If you don’t get their agreement potentially you have breached the contract and made an unauthorised deduction from wages
- are furloughed for a minimum of three weeks but there is no maximum period of furlough (although the current job retention scheme that refunds the 80% is only initially guaranteed to be in place until the end of May)
- return to their normal terms of employment at the end of furlough
There is no criteria for selecting those who are furloughed, other than you have no work for them and they do no work for you whilst they are furloughed.
Redundancy terminates the employee’s employment with you. There are statutory rules around what a redundancy is as it is a form of dismissal, how you consult on potential redundancies and how you select for redundancy. Unfair selection is one of the potential grounds for an unfair dismissal claim. If you get it wrong, you risk losing a claim in a tribunal.
If you have no work, or work has diminished in particular areas of your business, you may consider redundancies as a permanent solution. Redundancy starts with changes to posts, not people. It is a decision to reduce a number of posts or remove them altogether that causes an employee to be dismissed on the grounds of redundancy.
Anybody being made redundant is entitled to be paid their contractual notice (or work their notice if you still have some work) and could be expensive. A redundant employee is also entitled to be paid for the accrued holiday entitlement including their notice period.
They must have worked for you for two complete years before they qualify for statutory redundancy pay. The amount they get will differ depending on their age but a a general rule they will get one week’s pay for every year of service.
Furloughing was introduced to reduce the likelihood of people being put out of work. It maybe that when the world starts spinning again and we get our businesses back working, that you have insufficient work for all your employees. It is at that point that you may consider whether redundancies is a route that you want to explore.
Lay-offs and Short-time Working
This is a bit less radical solution in the short term if there’s not enough work for your employees. If you don’t have enough cash available to pay your employees on furlough, and last until the Government refunds the 80%, you may consider lay-off as an option.
But like redundancy, lay-offs and short-time working may be something you consider when work starts again, but it’s slow starting up. Lay-off and short-time working are different than redundancy and different to furlough leave. Employees who are laid off continue to be employees and continue to accrue length of service.
How long can you lay off employees?
There’s no limit to the length of time that you can lay employees off or put them on short-time. But employees can apply for redundancy and claim redundancy pay if it’s been:
- 4 weeks in a row
- 6 weeks in a 13-week period
Lay-off pay entitlement and short-time working payments
Unless the contract of employment with the employee states that you can lay them off with reduced or no pay, you should pay employees their full pay whilst on lay-off or short time. If the employee is unpaid, they are entitled to guarantee pay.
If you have no lay off clause in your contract that means that if you lay off, you will need to pay your employees their normal pay.
Rate and length of statutory lay-off pay
Employees are entitled to guarantee pay during lay off or short-time working. The maximum they can receive is £30 a day for 5 days in any 3-month period – so a maximum of £150. If the employee usually earns less than £30 a day, then they will receive their normal daily rate. If the employee is part-time, their entitlement is worked out proportionally. Employees cannot claim guarantee pay for any day that they do some work.
Eligibility for statutory lay-off pay
The employee must:
- have been employed continuously for 1 month (includes part-time workers)
- not have been laid off because of industrial action
- reasonably make sure they’re available for work
- not refuse any reasonable alternative work (including work not in their contract)
Statutory lay-off pay and the employment contract
Not paying guarantee pay counts as an unlawful deduction from an employee’s wages – employees could make a claim to an employment tribunal.
Applying for redundancy
Employees can apply for redundancy and claim redundancy pay if they’ve been laid off without pay or put on short-time and receive less than half a week’s pay for:
- 4 or more weeks in a row
- 6 or more weeks in a 13-week period
To apply for redundancy in this scenario
1. The employee must write to you to claim redundancy within 4 weeks of the last day of the lay-off or short-time period.
2. You, as their employer, have 7 days to accept their claim or give the employee a written counter-notice.
3. If you do not give the employee a counter-notice, the employee can assume that you have accepted their redundancy claim.
4. A counter-notice means that you, the employer, expect work will soon be available – it must start within 4 weeks and must last at least 13 weeks.
You can withdraw your counter-notice in writing.
The employee must resign to get redundancy pay. The timing is crucial – they have 3 weeks to hand in their notice, starting from:
- 7 days after the employee gave you written notice (if you did not issue a counter-notice)
- the date you, as the employer, withdrew your counter-notice
If you are considering lay-off or short-time working talk to us first, we can help you through the decision-making and with the process that you must use to prevent a claim that you have acted inappropriately.
If you think you may need further HR advice regarding COVID 19 and employee issues then please call us on 01706 565332 or email firstname.lastname@example.org
Metis HR is a professional HR Consultancy based in the North West of England supporting clients across the country. We specialise in providing outsourced HR services to small and medium-sized businesses. Call us now on 01706 565332 to discuss how we may help you.