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The Independent Automotive Aftermarket Federation

COVID-19: Advice to employers from Lawgistics regarding redundancies and layoffs

Date: 23-Mar-2020

Lawgistics have developed some FAQs for businesses considering redundancies.

Because of the coronavirus situation, can I make my staff redundant?
If you are in the regrettable position intending to close your business because of the coronavirus, this is certainly a redundancy situation. Even if you intend to re-open the business once the situation improves, this remains a redundancy case, especially so given the expected length of the coronavirus disruptions.

If you are closing a part of your business or some of your offices, then you are making redundant jobs in those offices or in that part of your business.

If you are responding to a drop in your customer orders and need to reduce your staff for that reason, it is also a redundancy situation. It will also be a redundancy if you are reasonably anticipating that you will not require so many employees in the near future and will have to introduce cuts.

Remember that in any situation you are making redundant the job roles, not the individual people. This means that all employees performing particular job roles will have to be put in a redundancy pool if you making some but not all of them redundant, and the individuals will have to be selected for redundancy based on the objective and reasonable selection criteria you will have to apply. The selection pool obviously will not be required if you have just one individual performing a particular job, say one manager, or you are closing down your business.

Assuming that the redundancy is not large scale, that is fewer than 20 employees will lose their jobs within 90 days, the essential procedure is:

  • consult with employees
  • select employees for redundancy
  • give notice
  • work out redundancy pay

The employer is expected to explore all options to avert the redundancies, and to continue to do so at every step of the redundancy process. ACAS emphasises this requirement in its guide, which can be accessed online:

Avoiding the redundancies is also the main point of the consultation process. The employer is required to look into any alternatives. Admittedly such alternatives will be extremely limited in the current situation, but the present crisis will very unlikely be an excuse acceptable to the Employment Tribunal for flouting the consultation requirement. The employer is also expected to encourage all staff whose jobs are identified as at risk of redundancy to put forward any proposals they may have for saving the jobs. The consultation is also to keep the employees at risk informed and supported throughout the redundancy process.

Redundancy may be an expensive option. Employees with two years of service or more will be entitled to the statutory redundancy pay as follows:

  • 1/2 week’s pay for each full year of service for employees under 22 years of age;
  • 1 week’s pay for each full year you for employees 22 or older, but under 41;
  • 1 and 1/2 week’s pay for each full year for employees 41 or older
Length of service is capped at 20 years. The weekly pay is currently capped at £525 and the maximum statutory redundancy pay is currently £15,750. Your employment contract or policies may specify a higher redundancy pay. Redundancy pay under £30,000 is not taxable.

In the current situation timing is crucial. Employers may have to streamline some of the process. Lawgistics can advise IAAF members on the risks involved and guide you through the procedure. 

Can I lay off my staff temporarily or cut their hours?
To lay off your employees temporarily without pay or to cut their hours of work, there should be a specific clause in the employment contract.

Lay Off and Short-Term Working
'The company reserves the right to lay you off or put you on short time working where this is necessary to meet the needs of the business, for example, if there is a temporary downturn in work. There will be no entitlement for you to be paid by the company for any days not worked during a lay-off or short time working period but you may qualify for guarantee pay at the relevant statutory rate. Your continuity of employment will not be affected by a lay-off or short time working.'

If your employment contracts do not contain a clause allowing lay-offs or cuts in hours of work, the contract may be varied by agreement, in writing is highly advisable, so that the suggested clause becomes part of the contract.

If you put your employee on notice of variation and the employee is delaying with returning the signed document but continues working nevertheless, the variation may be deemed as accepted.

The laid off employee may be entitled to the statutory guarantee payment, if this employee has been employed continuously for 1 month, remains available for work, does not refuse any reasonable alternative work and has not been laid off because of an industrial action. The maximum guarantee pay is £29 a day for 5 days in any 3 months’ period, making the maximum of £145.

If an employee has been laid off or kept on short-time for 4 or more consecutive weeks or has been laid off or kept on short-time for a total of 6 or more weeks in a period of 6 weeks, this employee may be entitled to claim redundancy pay provided a notice of intention to claim is served on the employer in the manner prescribed by the regulations.

Are there any alternatives to redundancies or lay-offs?
By agreement, which should be in writing, your staff may agree to accept a pay cut or take an extended leave, unpaid or with some pay.

If your employee is opposing what is suggested, it is likely to be deemed that employment has been terminated with redeployment on the offered terms. The deemed dismissal will be subject to the test of reasonableness, if the employee can bring a claim to the Employment Tribunal. The employer may claim ‘some other substantial reason’ as the reason for dismissal. Each situation will be fact sensitive.

In the redundancy process, voluntary redundancies should be offered.

Your employee may be entitled to take unpaid parental leave and may agree to take it. The entitlement is to 18 weeks’ leave for each child and adopted child, up to their 18th birthday. The limit on how much parental leave each parent can take in a year is 4 weeks for each child, unless agreed otherwise, and the leave is to be taken in weeks.

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