The chancellor has extended the Coronavirus Job Retention Scheme until October, but firms may still need to make furloughed staff redundant. Michael Shroot discusses the salient issues.

News that the jobs retention scheme will continue until the end of October is welcome as the government gradually eases lockdown and people are encouraged to return to work where appropriate. In his recent announcement, Rishi Sunak confirmed there will be no changes to the current scheme until the end of July, after which it will continue for all sectors but ‘with greater flexibility’.

Even so, many businesses will be impacted by the wide-ranging effects of the coronavirus pandemic and may be left with no choice but to make redundancies.

Normal employment contract rules continue to apply during the furlough period so a redundancy programme can be implemented, although the process is somewhat more complicated.

Making redundancies after furlough was introduced

A crucial question is whether an employee who was given notice of redundancy after the introduction of the furlough scheme but when still in work, can then receive furlough payments during their notice period.

The government’s guidance does not deal with this issue directly. However, it seems possible under the rules of the scheme for an employer to propose to staff who are working out their notice, but still employed, that they should instead be furloughed.

This would require the consent of the employee, addressing their entitlement to statutory notice, and ensuring the aims of the scheme were met if the costs of paying the employee during their notice period would have been incurred regardless of the pandemic.

Can an employee retain their furlough status during the notice period?

A related – and equally important – question is whether an employee who has been given notice of redundancy whilst furloughed can retain their furlough status during the notice period? The guidance seems to indicate that an employee can stay on furlough during their notice period.

Why you should think about collective redundancy issues

If you plan to vary the contracts of 20 or more employees within a period of 90 days or less, you should consider whether you need to undertake collective redundancy.

If so, you have a legal duty to inform and consult appropriate employee representatives and notify the secretary of state. Failure to comply can land you with a hefty financial penalty.

Crucial issues around choosing staff for redundancy

It is also important to keep in mind that normal rules on selecting staff for redundancy still apply.

This means you must establish that redundancy is the real reason for dismissal and that you have acted reasonably in all circumstances of the case.

In practice this requires an employer to follow general procedural fairness guidelines, or if you have a company redundancy procedure, you must follow that procedure. Matters to be addressed in this process include warnings and consultations, fair selection basis for redundancy, and consideration of alternatives to redundancy.

In addition, some thought should be given to how meetings with employees can be held in a way that is fair. For example, you would need to decide whether to use a virtual platform and work out how the employee could arrange to be accompanied at the meeting.

Ensuring you recover the furlough grant

If you select a furloughed employee for redundancy, you should ensure they have served a minimum of three weeks on furlough before they are dismissed, otherwise it is unlikely you will be able to recover the furlough grant.

While a furloughed employee on notice would receive 80 per cent of their usual salary through the furlough payment from the government, the rules on statutory notice pay mean you must ensure the minimum statutory notice period is paid at the employee’s normal remuneration – in other words you would have to top it up by  20 per cent for the notice period, if you are only paying employees 80 per cent during that period.

Careful consideration needs to be given if you decide to make a payment in lieu of notice, as this payment may not be recoverable under the furlough scheme.

It may be worth requesting the employee to take any outstanding holiday during the furlough period, so the government effectively contributes 80 per cent. You should note, though, that you may also have to top up some elements of holiday pay by 20 per cent to make up any shortfall between the furlough amount and normal remuneration.

If you require further information on any aspect of these or other employment law issues, please contact Michael Shroot at or call him on 0161 761 4611.