CJRS: Less than 1 month until close – Key redundancy considerations for employers

Over seventeen months since its first launch in March 2020 – and following a number of surprise extensions along the way – the Coronavirus Job Retention Scheme (CJRS) has now entered its final month. It will draw to a close on 30 September 2021.  Over 11.5 million jobs have been supported by the scheme, allowing employers to retain employees on furlough.

Although there is no doubt that the emergency nature of the introduction of the CJRS, and its hurriedly drafted provisions, have given employers their fair share of headaches as they have sought to understand key eligibility criteria, for many businesses the CJRS has clearly averted the need to make large-scale redundancies.  However,  businesses may now be faced with difficult decisions as the financial support given by the scheme comes to an end.   Barring any last-minute unexpected announcements there are no plans for the government to extend the CJRS further.  Latest available figures show that at the end of June 2021, nearly 2 million employees remained on furlough, with 28% of employers still using the scheme.

Here, we consider how the CJRS has worked to support employers to date, and key considerations for businesses which may now unfortunately be in a position where the possibility of redundancies is having to be considered.

CJRS: Background

During its life-span, the financial contribution available to employers for employee wages has changed on a number of occasions as the government has responded to the twists and turns of the pandemic.

Originally introduced in March 2020 to provide 80% of employee wages, subject to a monthly cap of £2,500, employers did not  have to make any contribution to the scheme until August 2020. At this point they were required to pay NICs and mandatory pension contributions for any furloughed employees. From September 2020, employers were required, in addition, to contribute 10% to the grant and then, from October 2020, 20%. At that time, the expectation was that the CJRS would be replaced in November 2020 with a new Job Support Scheme plus a Job Retention Bonus for employers who retained employees until at least 31 January 2021.

However, on 31 October 2021, in a surprise announcement, the government confirmed that the CJRS would continue and employers’ contributions to the scheme would revert to that which had applied in August 2020 (i.e NICs and mandatory pension contributions). It was later announced that employers would  need to contribute 10% to the grant again from July 2021, and 20% from August 2021.

In its final month, therefore, employers who are continuing to use the scheme are required to pay employee NICs and mandatory pension contributions, plus 20% of the grant.

Redundancy considerations

Employers who have availed themselves of the CJRS are not restricted from making redundancies. However, until the CJRS scheme ends on 30 September 2021, its availability as an alternative to redundancy is something which employers should consider as part of their decision-making process.

Otherwise, employers should consider the need for redundancies in the normal way, ensuring that a fair process is followed.  This will necessarily involve providing information to the affected employees and consulting with them. If any employees continue to be on furlough, steps need to be taken to ensure that this process happens effectively and meaningfully, which may involve using online tools.  Employers must also be careful to ensure that any decisions are reasonable and non-discriminatory and should avoid automatically using furlough absence as a selection criterion. Employees who have been on furlough retain exactly the same rights to protection against unfair dismissal and discrimination as all other employees.

Any employees who are responsible for conducting the redundancy process (eg leading consultation meetings) should not be on furlough while they carry out these duties.

Collective consultation

If an employer is proposing to make 20 or more employees redundant at one establishment within 90 days, collective consultation will also be required with trade union or employee representatives. If representatives need to be elected, employers will need to factor this into the time-frame for the redundancy process and consider how the election process will be managed, particularly if any employees remain on furlough.

Collective consultation can commence during furlough (subject of course to appropriate information and consultation arrangements being in place); however, the requirement for consultation to have started at least 30 days before the first dismissal takes effect means that employers no longer have opportunity to conclude the whole process before the CJRS scheme closes.

Notice of termination

Since December 2020, employers have not been able to claim a grant under the CJRS for the period for which employees are serving notice. Employers must therefore fund any payments in respect of the notice period. Further, the CJRS does not fund any payments in lieu of notice.

Calculating notice payments may not, in some circumstances, be straight forward. Furloughed employees who are only entitled to statutory notice are entitled to have their notice pay calculated on their pre-furlough pay. However, those employees who have a contractual notice period which is at least a week more than the statutory minimum may only be entitled to notice pay at their furlough rate.  This will depend on the terms of the contract of employment and furlough agreement. Reputational and employee relations’ considerations also apply. Legal advice should be sought.

Redundancy payments

Legislation was introduced in July 2020 to provide that statutory redundancy payments must be calculated using an employee’s pre-furlough wage. The cap of £544 per week still applies. Statutory redundancy payments are payable to all employees with at least two years’ service. CJRS grants cannot be used to fund redundancy payments.

Useful links

Coronavirus Job Retention Scheme (guidance collection)