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Redundancy fears at the end of the furlough scheme

Published 02 August 2021

Redundancy can be both a fair and unfair reason for dismissal, which is worth bearing in mind with thousands of job losses predicted when the furlough scheme ends. 

Essential financial support from the Treasury to help employers retain jobs during the pandemic has gradually been reduced, with the Coronavirus Job Retention Scheme (CJRS) due to end on 30 September 2021 

Last month employers had to pick up 10 per cent of their employees' salaries, when government support dropped from 80 per cent to 70 per cent. 

At the start of this month, the support was reduced further to 60 per cent, with employers picking up 20 per cent of the furlough pay in August and September. 

The British Chambers of Commerce (BCC) has reportedly said around one in five businesses are likely to make staff redundant as a result of the changing furlough requirements 

The BCC quizzed 250 businesses with employees still on furlough. The study revealed18 per cent said they were likely to make staff redundant in response to being asked to contribute up to 20 per cent towards wages, while a quarter said they would aim to reduce hours or move staff to part-time working patterns. 

The survey, carried out between 5 and 23 July, found unless furloughed employees are made redundant, or brought back to work, keeping them on furlough through the month will ‘cost businesses millions of pounds.’ 

Most recent figures for the CJRS show that there were 540,000 employers with 1.9 million staff on furlough on 30 June 2021 

It is inevitable that with the end of the CJRS organisations will have to restructure to meet new and difficult operational and financial challenges. 

It will undoubtedly lead to redundancies with employers having to downsize or cut their workforce. 

Redundancy can be a difficult, stressful and worrying time for all involved. 

It is never going to be easy, especially for an employer who may have to axe loyal and long-serving employees, but key to getting the process right is ensuring it is fair and reasonable. 

This is essential because dismissal by way of redundancy can amount to an unfair dismissal 

Circumstances in which a redundancy may be found to be unfair include the employee being unfairly selected, inadequate consultation or a failure to reasonably consider alternatives to redundancy. 

A formal redundancy policy is helpful for employers because it ensures fair treatment for all employees across the organisation. It also informs employees of exactly what to expect during the process. 

For employers who do not have a formal redundancy procedure, ACAS provide good practice guidance on how to conduct a fair redundancy process 

The guidance includes matters for employers to consider in an attempt to avoid redundancy. ACAS say: 

Before starting a redundancy process, you should consider all options to reduce or even avoid redundancies. 

For example, you could see if you can: 

  • offer voluntary redundancy 
  • change working hours 
  • move employees into other roles 
  • let go of temporary or contract workers 
  • limit or stop overtime 
  • not hire any new employees 

A member of staff made redundant is normally entitled to statutory redundancy pay if they are an ‘employee’ and have worked for their employer for two years or more. An employee is someone who works under an employment contract 

Statutory redundancy pay is : 

  • half a week’s pay for each full year you were under 22 
  • one week’s pay for each full year you were 22 or older, but under 41 
  • one and half week’s pay for each full year you were 41 or older 

Length of service is capped at 20 years. 

Weekly pay is the average an employee earned per week over the 12 weeks before the day they received a redundancy notice. 

If a member of staff was paid less than usual because they were on furlough, the redundancy pay should be based on what they would earn normally. 

Since 6 April 2021, weekly pay is capped at £544 and the maximum statutory redundancy payment is £16,320.  

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For employment law advice or if you are affected or want information and support by any of the issues in this article please give us a call. 

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