Paul Ball: What I would say is in terms of if there's any kind of selection process that might be sensible, it's taking into account individual circumstances. So for example, if somebody might be a single parent with school aged children, furloughing them might actually be... They might be appreciative of that in comparison with somebody who perhaps is working from home but living alone and the thought of being furloughed might be something that creates a lot of anxiety for that person. But the starting point really, Sam, is that there's no hard and fast rule as to whether you should apply any kind of selection process in deciding whether to furlough people or who to furlough.
Host: Excellent. Thanks for clarifying, Paul. So on to our second question and that is, do employers need to be able to prove that furloughed employees would have been made redundant if they were not furloughed to access the grant?
Paul Ball: In short the answer to that is, no. The earlier guidance that was issued by the government about this scheme suggested that that would be the case. So furlough money was going to be something that could only be claimed for people that would otherwise have been made redundant because there was no work for them. That has been removed from the later versions of the guidance and so that isn't a requirement.
Host: Okay. And those employees being placed onto furlough, do they need to agree to that?
Paul Ball: Ideally, yes, but the form of the agreement may vary. The best scenario would be to have a written contractual variation where the individual confirms their consent to be placed on furlough or for the employer to have the right to place them on furlough at an appropriate time and with clarity over what that means so that on the one hand the employee is not expected to carry out and not required to carry out any work during the period of furlough. Any pay reduction that is applicable being set out and the individual providing their consent to that.
Paul Ball: For many businesses, however, doing that is simply not going to be practical or hasn't proven to be practical. And so they have proceeded on the basis of informing employees that furlough rules are applying and they are not required to work and then writing to the employees to confirm those particular arrangements. The government guidance has made it clear that whilst the ideal scenario would be to have written consent of employees who are furloughed, of every employee to be furloughed, that isn't necessarily always going to be necessary and there'll be circumstances where as long as you've communicated to the employee that they are being furloughed and why they're being furloughed, then that will be sufficient evidence for the purposes of accessing the grant from the revenue.
Host: Okay. Excellent. So another question that we've received, which is on the opposite end of that spectrum really is, can an employee demand to be placed on furlough?
Paul Ball: No, they can't. The issue really with furlough is your ability as an employer to access the grant for an element of the employee's wages to be paid for by the government. You can furlough an employee or require an employee not to work without accessing the grant, but why would you do that, of course? Equally, an employee cannot demand not to work and for you to claim an element of their wages from the government. It really has to be consensual. But the trigger is going to be the employer deciding whether or not it wants to seek to access money from the government to pay a proportion of the employee's wages and if it does, then it can decide to ask for the employee's agreement to a variation to the contract for them to be placed on furlough for a period of time. An employee cannot turn around to the employer and say, "I demand that you furlough me."
Host: Okay, thanks, Paul. So how does this affect employees who are already on sick leave or who maybe are self-isolating?
Paul Ball: So, if an employee is self-isolating or on sick leave the rules are clear that that is something that is subject to the sick pay regime. So that's either company sick pay or statutory sick pay and both those persons won't be eligible for payment out under the job retention scheme from the revenue. If and when that sickness comes to an end and the employer doesn't need that individual to work, then at that point furlough arrangements could be entered into. But whilst they are sick or they're self-isolating, then it's dealt with as a sickness issue rather than a furlough one and you couldn't access furlough payments for them.
Host: Okay, brilliant. So, when we were first talking about deciding which employee should furloughed, you mentioned about some employers taking the approach of kind of rotating throughout their workforce. What's the stance on intermittent furlough leave for individuals?
Paul Ball: I mean it's not the case, Sam, that people have to be on furlough from one date and then carry on being on furlough until such time as a scheme comes to an end. It's really for the employer to decide how long they want somebody to be furloughed for. But what the government scheme is clear about is that a period of furlough has to be at least a three week period. It can be longer, but it has to be at least a three week period.
Paul Ball: So that might suggest, for example, that if you have somebody who might work in an accounts team and there is a month-end requirement for somebody to do some work, but less during the rest of the month. For example, they could be furloughed for three weeks and be asked to return to work for the final week of the month-end and then be placed back into a furlough as long as that further furlough period is for at least a three-week duration, then you'll be eligible to make claim payments under the scheme for them. So it doesn't need to be open-ended, it can be intermittent.
Host: Excellent. Okay. Thanks for clarifying, Paul. So the next question we've got in, is what notice do I need to give my employee before I bring to an end a period of furlough and bring them back into work?
Paul Ball: And that's not something that's dealt with in the guidance, so it really comes down to what you might've agreed with the employee at the time, that you've asked them to accept a temporary variation to their contract to be placed in furlough. And in some respects that might depend on your normal working cycle and also whether you have given the employee scope to take on other work, whether it's paid or unpaid work for other parties during any period of furlough. You might have done that, for example, if you are applying the statutory cap on what you can claim under the furlough scheme and the employee is more highly paid than that and they have a shortfall in their income. You might've agreed that they could do some other work. In that scenario or if they're doing, for example, voluntary work as part of helping out with this crisis period, it would make sense to agree a minimum period of notice that you would give the employee when you want to call them back from furlough, whether that's a week or 48 hours or otherwise.
Paul Ball: But in the absence of any specific agreements, there's nothing to stop the employer just applying a reasonable period of notice and that could be no more than 24 hours. If you bear in mind, individuals aren't really going to be doing much else at the moment other than complying with the lockdown rules. I would imagine that in most cases employees would be able to return to work within that kind of period of notice. I mean, there may be some circumstances where they're not necessarily willing to return to work, but they certainly should be able to. So I would have thought that if you haven't specifically agreed a particular period of notice on which you will bring furlough to an end, somewhere between 24 and 48 hours would I think be not unreasonable.
Host: Agreed. Okay. That made sense. So coming on to our final question. Will it be an unfair dismissal to make employee redundant if they could have been placed on furlough leave as an alternative to that redundancy?
Paul Ball: Yeah, it's a good question, Sam. I mean, I think the answer to that is, it depends, but there's a distinct possibility that it would be an unfair dismissal. If you move straight to make somebody redundant when there was otherwise scope to furlough that employee, particularly if the employee would have accepted the 80% of their normal salary up to the £2,500 a month figure and not require any particular top-up during any period of furlough. So if that scenario arises and the employer refuses to consider furloughing and moves straight to making the individual redundant, if they've got two years service, I think that an employment tribunal judge would be likely to have quite significant questions over why furloughing that individual was refused or not even considered by the employer.
Paul Ball: And I'm not saying it will necessarily mean that dismissal would be found to be unfair, but I think that there'd be some questions for the employer to answer as to why its actions were those of a reasonable employer. If, however, furlough has been considered and the employee has indicated that they would not be willing to be furloughed unless that was on their normal pay and they weren't willing to accept any kind of reduction in their pay, well so long as the employer is able to show that actually, the reason they ended up making the individual redundant is because there is a redundancy scenario and furlough was something that was dismissed by the employee.
Paul Ball: The furlough would still have been available but rejected by the employee and given that it needs to be done by agreement. In that situation, I think the employer would be likely to satisfy a tribunal that redundancy was the right option. One thing I would also say is that this also presupposes of course that the employer has carried out a fair redundancy process with the employee, whether that's consultation on an individual or a collective basis, but assuming that it has done so, in that situation, I think, moving to redundancy rather than furlough would be one that a tribunal would be unlikely to consider to be unfair.
Host: Yes. Yeah. Tricky stance for an employer to maintain. Okay, Paul, brilliant. So hopefully that has cleared up some of those background questions for anyone listening. Obviously there's a lot of uncertainty moving forward so as this scenario continues, Paul, and we continue to see people on furlough for kind of a longer period. What happens if the employer gets to a position where their ongoing business overheads mean that they can't afford to employ everyone for much longer? What are their options there?
Paul Ball: We're starting to see this a lot, Sam. Most of our queries now aren't so much about furloughing employees but about the next stage in this. And I suppose the options boil down to three, as I see it, one would be seek to access the government backed loans to help any shortfall in funding for a short term period and that's obviously commercial judgment call on the business as to whether that's something that is prepared to take on additional borrowing or otherwise. That's the first option. The second option would be to see if there's any way in which the most significant overheads that you're facing can be in some way reduced and that could include things like seeking delays in rent instalments, rent reductions or things like that, delaying any other capital payments with agreement. But in most businesses, the biggest overhead is the wage costs.
Paul Ball: So one thing that employers might be sensible to consider if they want to potentially avoid redundancies would be to consider pay reductions and seeing if it can get agreements of employees to either accept a reduction in pay on a standalone basis or hand-in-hand with things like reduction in hours of work and reduction and other benefits provided, of course, you don't go below the national minimum wage in doing that.
Paul Ball: And that could be something that you might seek to do with employees who are furloughed as well as employees who aren't furloughed. That's an option that you could take. And the third obvious option there would be if it's a severe situation, potentially I'm to consider permanent job cuts through a redundancy program. So there's really the options that we're advising businesses about when they are looking at longer-term not going to be able to sustain their operations on the same basis.
Host: Okay. Cool. So focusing on the second option that you mentioned now around trying to engage employees to opt-in to pay reductions, that's obviously not going to really be too high on anyone's list if there is employees who aren't particularly willing to take that on. Is the employer in a position where it can impose those pay reductions on their employees?
Paul Ball: Yeah. I mean, I think imposing a pay reduction is always a high-risk strategy for an employer to take. There's a couple of reasons for that. First of all, any reduction is going to be considered a detrimental change and it's likely to be considered a fundamental breach of contract. Even if you have got a clause that allows you to change the rates of pay according to what shifts somebody may or may not be working. An arbitrary reduction in pay is likely to be a fundamental breach of contract and that entitles somebody to resign and claim constructive dismissal. There's a second claim that somebody could pursue in that scenario as well which is an unlawful deduction from wages complaint.
Paul Ball: So they're the two types of tribunal claims that could arise. A constructive dismissal complaint requires somebody to have two years of service. I would say that at this point in time, even if an employer were to impose a pay reduction on employees with less than two years’ service, I suspect employees wouldn't resign in claim constructive dismissal by in large, simply because that would mean that'd be mostly going into unemployment and there's no other jobs available at the moment during the lockdown. So I don't think the chances of a resignation and a subsequent complaint of constructive unfair dismissal immediately, it would be the highest priority for an employee. However, an unlawful deduction from wages complaints is one that doesn't require a termination of employment or a resignation. So you could, if you were the employer, seek to impose a pay reduction and think that the employees have agreed to that.
Paul Ball: But unless you've got that express agreement and the signed agreement that says they are willing to accept the particular pay cut that you have suggested, you would always run the risk at some point down the line, the individual complaining that that was an unlawful deduction from wage. They haven't given their agreement to it and seek reinstatement of the pre-reduction pay as well as pay of arrears that have been deducted by the employer. And that is a claim that I think is far more likely to arise. I suspect we'll see a lot of those in due course with some employers who may have imposed pay cuts and those are claims that I think are more likely than not going to be successful. So in a position of a pay reduction is something that is a very high risk strategy. It's always, always preferable to try to proceed on the basis of seeking the employee's agreement to that reduction and if they won't, then potentially going through a contractual variation exercise, which ultimately could be on the basis of you giving the individual notice of termination of their employment.
Paul Ball: That their employment will end at the end of whatever the contractual period of notice is in their contract, but at the same time as giving the notice of termination also offering the employee new employment on the new terms which reflect the pay reduction. And that gives the employee two choices really, either to refuse to accept the pay reduction and know that their employment will come to an end at the end of that notice period or to accept it and potentially begrudgingly but to accept it and sign a new contract and continue to be employed with the pay reduction in place. Now that might sound like quite a draconian step for an employer to take if it wants to effect a pay reduction but that gives much greater certainty because the individual will have signed a new contract with right rates, correct new rates of pay rather, in there.
Paul Ball: It will mean they can't subsequently claim unlawful deduction from wages. What they could do in that scenario is potentially claim unfair dismissal and rather than it be a resignation it would be an express dismissal by the employer having given notice and the employee could try and bring an unfair dismissal claim saying that they've been dismissed for refusing to accept a pay reduction. However, as long as the employer has followed a fair process of consulting with the employee about the reduction and it's got a sound enough business reason as to why the reduction is needed, then that would be likely to be a fair dismissal for what's called SOSR or some other substantial reason. So in a serious case where the employer is really wanting a pay reduction to be made and for the employees to accept this, because it still needs the same number of employees it just necessarily can't afford to carry on paying them at the same rate, that approach, the dismissal and re-engagement approach, is actually far more preferable than going through the imposition of a pay reduction.
Host: Okay. So there are some options there then, Paul?
Paul Ball: Yeah.
Host: Okay. If pay reductions, your kind of second option there, aren't going to be possible for whatever reasons for the employer and the employer decides that redundancies are the only way it can proceed. What's the best approach for them to go about implementing these? Does having employees on furlough make it more difficult and should employers bring people back from furlough so they can consult with them about their role being redundant?
Paul Ball: Yeah, I mean the normal rules apply with regard to any redundancy dismissals. The fact that you might have a lot of people furloughed and not at work doesn't mean that you have to ignore the normal rules and the normal approach that would have to be taken with regard to redundancy dismissals. But it just may mean it's a little bit more difficult to do the normal because the employees aren't there. In terms of how you go about implementing them, it really depends on the numbers that you're dealing with. If you're dealing with fewer than 20 employees at any one workplace or establishment likely to be made redundant, you're dealing with individual consultation obligations. You're meeting with the employee, informing them why their role is at risk of redundancy, explaining how any selection process might be undertaken, what alternatives to redundancy will be considered. Doing an assessment and vetting employees against other employees in a similar role and then looking for alternatives and looking to mitigate the consequences through redundancy payments, enhancing those job clubs and all those kinds of things would be normally required.
Paul Ball: That becomes a bit more complicated when the employees you're dealing with are those who are potentially not at work because they've been furloughed and it might be difficult to consult with them while they're furloughed unless you're satisfied they've got access to things like video conferencing facilities and the like. So in that scenario, Sam, it might actually be easier for the employer to call employees off furlough, so they're back at work strictly for the purposes of consulting with them. The guidance doesn't cover this particular point or say that's what employers need to do, but that might be something that is logistically more straightforward for the employer to manage than doing so over video conference.
Paul Ball: That presupposes, of course, that you could do face-to-face consultation in a socially distant way with the current lockdown, so that might present a challenge. Where more than 20 roles at any one establishment are affected, there's a further legal obligation, which is collective consultation with elected or appointed trade union representatives about the redundancies. And that actually in some respects would make a redundancy process a little bit more straight forward because most of your consultation would be carried out with the representatives rather than with the employees.
Paul Ball: I saw an announcement earlier this week or tail end of last week, which made it clear that whilst employees aren't allowed to work whilst they are furloughed, engaging in consultation with the employer for the purposes of collective consultation or individual consultation, doesn't breach the furlough rule. So you can carry out consultation with somebody whilst they are furloughed but if you've got potential need to individually consult with large numbers of employees that might be something that you simply haven't got the resources to do. So a larger scale redundancy with collective consultation obligations with a few elected or trade union representatives is something that might actually be more straightforward for you to be able to undertake whilst furlough arrangements are still in place.
Host: Okay. So it comes down to the numbers there then really?
Paul Ball: Yeah, it does. It does. I mean the main reason I've mentioned the 20 plus figure is because of a secondary obligation to collectively consult and just to be clear where an employer makes 20 plus people redundant at one establishment and hasn't collectively consulted with representatives in advance about that redundancy exercise, the employers then exposed to a potential claim for what's called a protective award and that's up to three months pay for every employee in respect of whom collective consultation should have taken place. And if a protective award claim is made and is successful, employment tribunals will award the maximum protective award of three months per employee unless they're satisfied that it's sensible or reasonable to reduce that and they'll only really be satisfied on that if the employer has taken reasonable steps to try to collectively consult. Where the employer has ignored those obligations completely chances are the tribunal would award a maximum protective award of three months pay.
Paul Ball: So that's a really big financial hit that a business might face if it doesn't do so. But even when it does have to collectively consult, there's still a need to do individual consultation. Along the lines of what I suggested in the answer to the earlier question, in terms of consulting with the employee about the reasons for the redundancy selection process, et cetera. However, if you have collectively consulted it would include consultation over those things and that typically means that when it comes to consulting with the individual employees it's a lot more straightforward to do it because you don't have to reopen everything you've already consulted with representatives about and you simply repeat what has been agreed or discussed in the collective consultation.
Paul Ball: Go through any kind of assessment that might've been undertaken with the employee against criteria and against colleagues, explaining the score to them, explaining why that means that being provisionally selected for redundancy and then consider alternatives. That might sound like quite a lot, Sam, but actually it's a lot more straightforward to do the individual consultation with an employee once you've done collective consultation than it is to simply have to go through all of that on an individual consultation basis with an employee or a group of employees fewer than 20.
Host: Okay, Paul. So on the consultation if an organization doesn't recognize trade unions or have an elected staff body, will it be impossible for them to have elected representatives to consult with?
Paul Ball: No, it won't be impossible but it might be more challenging to get to the point where employees have held an election and decided who amongst their group is going to be the elected representative or representatives for the purposes of a consultation. So what an employer would need to be thinking about there really, Sam, is things like the message it's communicating to employees about why it needs to collectively consult. How many representatives it wants? What the role of the representative will be? Why it's beneficial to the employees to try and agree representatives amongst themselves and volunteer to stand as representatives and so on? And part of the purpose of that or the message that would need to be communicated is that it's going to be easier for the employer to listen to employee views if they are channelled through one or two or three representatives than it is to try to have umpteen video calls, teams calls and so on with all the employees who are at risk on an individual basis.
Paul Ball: So there's going to be a need to encourage employees to understand the benefits of having elected representatives. The employer can still post out ballot papers and the ballot can still be conducted. There'll be mechanisms whereby a ballot could be conducted online. I would have thought that was something that could be achieved or engineered relatively easily. But the upshot ultimately is if the employees aren't interested in voting for representatives, so people don't stand, that aren't interested in voting for representatives, at that point and no election takes place at that point, the employer doesn't really need to carry out its collective consultation anymore. That duty has gone by the wayside, but bearing in mind what I said before about sometimes it's more challenging to have a large scale individual consultation exercise if you haven't done a collective consultation as well and you can actually get through more and reach agreement on things like selection pools and criteria and so on and so forth through collective consultation.
Paul Ball: If I was in this scenario, Sam, I would be encouraging employers to do whatever they can to ensure that the employees whose roles are at risk of redundancy to want to be the volunteer to be a representative and stand in an election and then following on from that for encouraging employees to actually hold an election so that they do get to the point where there are representatives who have been nominated and appointed by the employees who are at risk. It's much easier for an employer to try to reach agreement on some pretty fundamental things such as how selection might be carried out, the timeframes, and things like that with a smaller group of elected representatives than it is trying to reach agreement with all the employees who are at risk. So I would always encourage an employee to try to ensure that an election takes place and they do have representatives in place.
Host: On redundancies in this scenario can an employer make employees who have been furloughed redundant ahead of those who haven't been furloughed? Are there any issues there-
Paul Ball: There are potentially are issues with doing that and I'd be reluctant to suggest it's sensible to make those who have been furloughed redundant ahead of those who haven't been furloughed, unless the employer when it was reaching its decisions on who to furlough, went through a transparent assessment process, which the employees had participated in and knew that they were being judged for a furlough against criteria such as performance, experience, skills, and things like that. I'll be very surprised if any employers across the country has went through that kind of thought process and can document that it went through that kind of thought process and consulted with employees about it at the time. So I think the numbers involved there would be pretty slim. If you haven't done that, I think going to make people redundant who are furloughed ahead of those who haven't been furloughed runs the risk of being an unfair dismissal, quite clearly because there won't have been any kind of a selection process that will have been undertaken in doing that.
Paul Ball: There will be some exceptions to that, so you might have furloughed an entire department and the work of that department might be something that has ceased in its entirety. So there might be employees who are furloughed in that department and then no one who isn't in that department who is still at work, but there might be colleagues elsewhere who have not been furloughed.
Paul Ball: I think in that kind of scenario, making those individuals redundant wouldn't necessarily be a problem so long as they follow a fair consultation process along the lines of what I outlined previously. But in all of the situations where you have, say a group of 20 operatives, 10 of whom were furloughed and 10 of whom have still been working, if you've still got a redundancy situation and you're thinking of making 10 employees redundant if you were to furlough the 10 have been made... Sorry, make redundant the 10 who have been furloughed, that would be an unfair dismissal. You'd need to pull all 20 together and decide which 10 are the ones who are unfortunately the ones to be selected for redundancy based on whatever criteria you decide to use, but furlough should not be one of those criteria.
Host: Okay, so if we are making redundancies, but as you just suggested, we're not using current positional furlough as a guide, but nonetheless, some individuals who are on furlough are deemed in that group that will need to be made redundant. Can that notice be given to them whilst they're still on furlough?
Paul Ball: Yes, it can. But one thing I suppose, just to make clear is notice pay isn't normal pay. So if while the individual is being furloughed they are receiving less than their normal pay. So the employer hasn't topped up whatever it's received from the revenue under the scheme to the individual's normal salary and they've just been paying them whatever they're able to recover under the scheme. The period of any notice of redundancy would need to be at the employee's normal pay rather than their reduced pay.
Paul Ball: And if an employer who was seeking to only pay to the employee during that period of notice, what they're recovering from the revenue I think would have a significant challenge to successfully defend any breach of contract claim that might arise in due course or claim for the balance of the person's notice pay. So that's really the main thing to bear in mind in regard to how much the individual would be entitled to during their period of notice and it might be more than is being recovered from the revenue under the scheme.
Paul Ball: And the second point really, and it goes back to some of my answers to some of the earlier questions really, Sam, is that you could only really get to the point of giving notice of redundancy for someone who's furloughed if you're satisfied that you have followed a fair consultation process with them as to why that role is at risk of redundancy, why they've been selected and so on and so forth. If you haven't done those and if the individual has more than two years service, you'd run the risk of an unfair dismissal claim regardless of the fact of whether they accept that you can give them notice during the period of furlough and you pay them their normal pay during that period of notice.
Host: Brilliant. Thank you, Paul. So we've covered quite a lot of ground there and hopefully answered some of those key questions that are starting to come onto the minds of employers as they look forward to the future in that kind of the medium to long term. Now that we've got lots of additional guidance as a group, this is published on our dealing with coronavirus hub page on our website. So please do go and visit that page to read through and the legacy updates that we've published today and we'll share this podcast along with Paul's contact details. So if you've got any specific questions or want to follow up with Paul personally all of he's information will be there.
Paul Ball: Thanks, Sam.
Host: Thank you for listening to Straight talking business success. To find out more about the series, please visit gateleyplc.com/business success. From here, you can subscribe for updates, meet our speakers, and get more information on all of the topics that we've covered.