Business

We've reached a crunch time for redundancies

Perhaps businesses have now reached the tipping point for redundancies
Andrew Lightburn

AS we head rapidly towards winter, and the anticipated second spike of Covid looming, it appears employers have reached a crunch point for reviewing the need for redundancies. The furlough scheme (CJRS) was incredibly generous, a 'no brainer' and certainly delayed many redundancies that would otherwise have happened.

Employees were willing to take a hit on wages because of a national lock down and it certainly helped it was over the summer months.

But the landscape is very different and so is the mood of both employers and employees. Facing an avalanche of redundancies, the government has introduced the Job Support Scheme (JSS). It requires employees to work a minimum of one third of their contractual hours with the employer paying 22 per cent of the unworked contractual hours and NICs and pension contributions, the government the other 22 per cent, and the employee taking a 22 per cent reduction.

The scheme starts on November 1 for an initial six months. From speaking to business leaders, they all raise the same point, which is a reluctance to pay employees for time not worked when income is stretched. It may also be the case that employees are no longer as keen to accept reduced wages after several months of doing so on furlough - and with Christmas now approaching.

So, many businesses will now be considering whether it makes economic sense to use the JSS or whether the point has come to make redundancies.

Objectively speaking the JSS could make sense for certain businesses with certain types of employees. For example, businesses with highly skilled employees may be more willing to retain employees and pay increased contributions if it means maintaining a skilled workforce. Whereas other employers may be less concerned about losing employees and re-recruiting if necessary.

If the JSS is not the answer, then what is? Employers could consider laying off employees but this is subject to having such a provision in the employee's contract, but even then it is a relatively short term solution as there is a legal mechanism allowing employees to claim a redundancy payment after 4 weeks on lay-off.

The more constructive solution may lie in renegotiating employees' terms and conditions so rather than employees clinging onto jobs that are not viable, jobs are changed to become viable. Specifically, a reduction in hours and or salary with perhaps provision for additional hours (overtime) to give some flexibility. This may well work out far cheaper than paying employees for unworked hours even with a government subsidy.

Finally, another significant facet of the old furlough scheme has been removed. Employers cannot make employees redundant or issue notice of redundancy whilst on the scheme and the scheme cannot be used to indirectly fund notice pay.

This again would point to the JSS being a far less attractive proposition and employers being far more likely to bite the bullet and implement redundancies.

It feels like businesses and employees are in a very different place to where they were in March or during the summer - and perhaps we have reached the tipping point for redundancies.

:: Andrew Lightburn (andrew.lightburn@dwf.law) is senior associate (employment) at DWF Belfast (www.dwf.law)

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Business