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Being Made Redundant on Furlough

Calendar September 14, 2020

There is no question that the Coronavirus Job Retention Scheme has been one of the tools that help preserve jobs during the pandemic. As the Scheme near its end on 31st October 2020, the employers start considering their options and reduced stuff cost. Sadly, severely affected businesses will proceed to make redundancies before the end of the Scheme. This frequently resulted in many furloughed employees having their role being put at risk of redundancy. Below is a summary of the main issues each affected employee should consider, with guidance from experienced redundancy lawyers.

What does being made redundant mean?

Redundancy is a type of dismissal which occurs when the employer stops trading or stops trading at the specific employee workplace, or no longer needs the job roles the specific employee carries out. Employees with more than two years in service who are made redundant are entitled to certain rights such as redundancy pay, the right to consultation, the right to minimum statutory notice, etc. If you wish to learn more about what redundancy can mean and your rights as an employer, our team of redundancy lawyers can help you.

Can an employee be made redundant on Furlough?

Unfortunately, placing employees on furlough does not prevent the employer from making them redundant and there is no requirement for an employer to wait until the 31st of October to make an employee redundant. Under government guidance, the employer can still make furloughed employees redundant while on furlough. The employers should ensure they follow the regular procedural requirements for redundancy and do not discriminate.

The interplay of furlough scheme and redundancy

The government guidance states that while on furlough the employees have the same rights inclusive the rights concerning redundancy. The employees’ entitlement to a genuine redundancy and a fair process still apply.
In addition to the general rules of redundancy, there are specific considerations that every employee should be mindful of. Under the Job retention bonus, the government incentivises the employers to bring back to work furloughed employees by offering them a one-off bonus of £1000 for each employee provided that they keep on the employee until 31st January 2021. Therefore, the employer’s duty to assess all the alternatives to redundancy includes also retaining the employee on furlough and taking the Job retention bonus. This failing is not properly considered the alternatives to redundancy may be a reason for challenging dismissal as unfair.
During the selection stage, the employer should ensure that the redundancy pooling and the selection criteria are fair. In relation to the furlough, if the employer selects from the pool only the employees already furloughed, the employee should challenge this approach as giving rise to unfair dismissal or even discriminatory dismissal.
The employer’s duty to consult the employees at risk of redundancy and also undertaking this process in a fair and meaningful way applies to furloughed employees as well. Particular consideration should be given to how to achieve online communication and consulting with the employees remotely. This will entail an extra planning of video calls/conferences by allowing extra time for any technical issues that might occur and also ensuring confidentiality and protection of data.
If the employer intends to make redundant more than 20 employees within a period of 90 days, then collective consultation is triggered, and the employer must check whether the appropriate employee representatives are appointed before the consultation is due to take place. The government guidance has confirmed that the employee representatives’ jobs during consultation do not constitute work and they are not in breach of ‘no work’ rule under the furlough scheme.
In respect of redundancy and furlough pay, any employee being made redundant while on furlough will be entitled to statutory redundancy pay. After a long debate on which calculation to use to work out the redundancy payment, on 30th July 2020, the government confirmed that redundancy payments must be based on employees’ pre-furlough salary rather than on the reduced furlough rate. This rule does not apply to the redundancy already made by the employers before 31st July 2020.
The employee made redundant while on furlough have a right to a notice period and they are also entitled to taking reasonable time off for looking for another job or re-training. The length of the notice period is based on the provisions of their employment contract. The calculation of statutory notice pay is also based on the employee pre-furlough salary, not their reduced salary during furlough starting with 31st July 2020. However, the employers are allowed to pay lower rates for notice periods as long as the notice period is at least one weak longer than the statutory minimum period. Furloughed employees are entitled to be paid for any untaken leave as well.
Under the law, the employers are not entitled to claim back under the furlough scheme the redundancy payment made to the redundant employees, payment in lieu of notice, or untaken annual leave.

Contact us

Furloughed employees have certain statutory rights when they are made redundant. When in doubt, an employee should seek legal advice from a solicitor in the event of redundancy. If you are having queries or need assistance on how the redundancy works or you need assistance with the negotiation of the terms of the settlement agreement, please contact our team of employment law specialists and redundancy lawyers today. Call us on 0330 221 0684 or email [email protected].


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