V1.0 : First Issue 30 April 2020
V1.1 : Updated to explain that collective redundancies must have elected employee representatives and this has a time impact 1 May 2020
V1.4 : Updated with newly shortened timeline reflecting a shorter employee rep selection process and moving both the selection process and the individual consultations to be within the 30 day consultation window. Note that this approach has a small amount of risk and you should discuss with your HR advisors / legal counsel and satisfy yourself that the risk is acceptable.
V1.5 8 June 2020. Updated to explain that using CJRS payments to cover redundancy notice may be disallowed in a future update of the rules.
How you should plan.
The CJPS could end before your revenues return to a level at which you can afford to pay those staff who are currently furloughed. If that happens you will be carrying the cost of those furloughed staff in full.
You need to consider :
- How long you could afford to do this for.
- How that cash hit would affect your business.
If you decide that you need to minimise the cash cost to your business to protect the jobs that your current revenue levels can afford then you need to act now to do that.
The time it takes and cost impact of making people redundant depends on the number of people being made redundant in a 90 day period.
Less than 20 people being made redundant in a 90 day period
You can run a consultation period in one week.
Between 20 and 99 people made redundant in a 90 day period
This is termed a collective redundancy and you must run a consultation period of no less than 30 days.
100 or more people made redundant in a 90 day period
The 30 da minimum consultation increases to 45 days.
If you have 20 or more people made redundant in a 90 day period then you must do three things :
- Notify the Redundancy Payments Service (RPS) 30 days before the first redundancy. Use this form.
- Provide a minimum 30 day consultation period before you can dismiss someone
- Consult collectively - with a trade union if you have one, a works council or representatives that have been nominated and elected specifically for the task. You cannot miss this step out.
You risk an unlimited fine if you do not do all of these three things plus your dismissals will be automatically ruled as "unfair".
Timescale and cash costs of the process
There are three components to the cash cost to your business :
- Cost of paying staff during the consultation period
- Cost of paying staff their notice period (statutory minimums here)
- Redundancy payment for staff who have more than two years service.
If you do not already have a work council of elected representatives that you can collectively negotiate with then you must create one. The nomination and election process needs to be built into your plan. It can take place within the consultation window.
The whole process should take around 6 weeks from when you start to when you issue leaver letters. So including a months notice that is 10 weeks plus the redundancy compensation payment itself. Depending on length of service, a rough approximation is 3 months salary cost.
You can download a planning chart here. Note that this is planning chart version 1.4.
Note that this V1.4 timetable includes a compressed election window that is within the consultation period. This carries some residual legal risk which you should discuss with your HR advisor / legal counsel.
CJRS will cover part of the salary costs assuming it is still in force.
If staff are on the CJRS during their consultation periods then the CJRS will cover all of part of their salary during that period.
The scheme rules do not currently state that CJRS payments cannot be used to pay staff when on redundant notice but the UK government has suggested that was not the intention. There may be a future update of the rules to prevent this and that update may be retroactive. If you are claiming CJRS for redundancy notice periods then we quantifying the amount that you are claiming. It would make sense to provision that amount in case it needs to be repaid in the future.
The CJRS cannot be used to pay for the redundancy payment itself but it can be used to cover the consultation period and notice period.
What does this mean for planning?
If you are in a severely cash constrained environment this does cause a problem in a collective redundancy situation.
Many staff will be on a minimum one month notice period. Given 1 months consultation and one months notice to pay, if your priority is to conserve cash then you would actually need to put staff on consultation on 1st May. This would then allow the CJRS to pay staff throughout consultation and notice periods leaving you with the redundancy payment as the cash cost to the business. (see note above on future clarification of scheme rules on redundancy notice periods)
The problem with this approach is it means you need to act before the government is likely to announce whether the scheme is extended or not.
This balance is one that you can only figure out for your business knowing your cash situation and how that cash cost would affect the rest of your people and the viability of your business.
This guidance note is to help you decide when to start planning and is not intended to be a replacement for detailed legal advice. Osbourne Clark can help with letters, FAQ's and detailed help and advice so please contact us if you need an introduction.
Now is the time to start planning this and modelling it through. For cash constrained businesses you may need to act very quickly to minimise cash cost.
The CJRS was designed to prevent redundancies where companies have a temporary loss of revenue due to COVID-19.
If you believe that your revenue is affected more long term than just during this lockdown then, unfortunately,CJRS is only a temporary solution whereas a permanent reduction in your cost base may be required.