Why were there so many redundancies announced in early July

Why were there so many redundancies announced in early July

Is there a link between the timing of the redundancy announcements and the furlough scheme?

On 1st July, the BBC reported that coronavirus led to UK companies cutting 12,000 jobs in just two days. These job losses, the article claimed, were largely in high street retailers and, particularly badly hit by the pandemic, the aviation industry.

Many large companies, including H&M, Boots, and John Lewis announced redundancies in early July too.

Chris Dobbs, employment & HR specialist, looks at why so many redundancies are being announced at this time, and how the timing ties in to the furlough scheme.

Are the redundancies due to furlough?

The costs of employing staff (not just salaries, but the other contributions) make up the largest overhead for most businesses. For the last 3 months, many employers have taken advantage of the Coronavirus Job Retention Scheme commonly known as the furlough scheme.

The scheme currently allows businesses to reclaim up to 80% of the wages (subject to a maximum cap) of qualifying staff and there are more than 9 million workers currently enrolled in some way. It is an expensive scheme for the government and one which cannot last forever; the payments start to reduce from next month and the scheme is due to end entirely in October.

If companies do not think they will be able to sustain their current staff wage bill as the cost starts to fall back to them, some will be considering redundancies as the only option.

When does furlough end?

The government has set out a timetable for the phasing out of the furlough scheme.

You can download our furlough scheme timeline by clicking here.

Will there be more redundancies?

It is certainly a possibility but as with many things nobody can be certain. The retail and aviation industries have both been severely hit by the pandemic and lockdown. However, recent changes to social distancing and the reopening of these industries may give companies the opportunity to recover at least in part.

There are no special rule changes and any restructure or redundancy at the moment is still subject to existing employment legislation. This means that mass redundancies can be a difficult and drawn out process. The cost to the business in work hours and redundancy payments may limit the number of future redundancies for some businesses.

Can you be made redundant on furlough?

The short answer is yes. Current guidance is that staff can be made redundant while they are furloughed but as mentioned above all their rights remain in force so care should be taken when doing so.

There are mixed opinions among legal professionals about whether use of the furlough scheme would be considered a reasonable alternative to redundancy. The issue has not yet been tested in Tribunal and no doubt it will be far too late for many people by the time there is a binding ruling on this issue.

An employment law specialist’s view on furlough and redundancy

“As the furlough scheme winds down the burden of paying for staff will increasingly fall back on employers. At the end of October, the scheme will end entirely.

Whether this will lead to more waves of redundancies is hard to say although unfortunately I believe it will be the case as businesses are forced to make a decision between continuing to engage the same staffing levels and surviving economic recovery.

What is almost certain is a change in the way a vast number of people work in the long-term. Where redundancies can be avoided it seems much more likely that we will see a change in working patterns, more flexible working and more remote working which will all bring their own challenges.”

Redundancy and the furlough scheme

If you require any assistance with carrying out redundancies in accordance with the law, we can help. We offer a free initial chat with one of our specialist lawyers to all new clients. 

We also offer a fixed-fee redundancy pack which includes a step-by-step guide, sample letters and telephone and email advice as you go through the redundancy process.

Please note the fixed-fee pack does not include redundancies of 20 or more people, which require specific collective consultation.  We provide assistance for these on a separate basis.

Furlough scheme timeline

You can download our handy furlough scheme timeline by clicking below.