Understanding The CJRS And Redundancy Procedures
The Coronavirus Job Retention Scheme has now been extended until the end of April 2021. Find out how this affects redundancy.
The guidelines are very specific
On the 5th November 2020, Chancellor Rishi Sunak announced that the Coronavirus Job Retention Scheme (CJRS) is to continue until the 31st March 2021. On the 17th December, this was further extended until the 30th April 2021.
It’s recommended that accountancy firms take note of how the CJRS affects redundancy procedures should any of their clients be affected.
Here we've put together a Q&A around this topic, as well as where to find more information should your client(s) require it.
General point on “fair” dismissal
According to UK law, an individual’s employment can be terminated by their employer at any time, as long as the redundancy is fair. Under the Employment Rights Act 1996, redundancy comes about because an employee’s role has been impacted in some way - this is therefore classed as fair dismissal. The reasons may include:
- The fact that the businesses has stopped trading, or plans to stop in the near future
- The area of the business the employee works in will no longer exist
- There’s not enough work for the employee to undertake
Employers who plan to make 20 or more staff redundant must legally consult with representatives of a recognised, relevant independent trade union. Alternatively, this may be an elected representative of the employees concerned. The minimum consultation period is 30 days, rising to 45 days if 100 employees or more are affected.
For further reading, the Citizens Advice website provides a detailed section on Rights at Work (aimed at employees) which you may find useful.
Back to COVID: Which employers can use the extended CJRS?
Employers can claim the grant as long as they have a UK Pay As You Earn (PAYE) scheme and a UK bank account.
The eligibility criteria for the scheme is now much wider too. Unlike the old Job Support Scheme, UK employers of any size can use the CJRS without any need for a financial impact test. It also doesn’t matter if the business itself is currently open or closed.
Furthermore, employers do not need to have claimed previously under the CJRS before the 31st October in order to receive the extended CJRS.
Can employers only use the CJRS if it is to avoid redundancies?
The original CJRS could only apply to employees who were furloughed due to coronavirus infection or because of coronavirus restrictions. However, as mentioned, the latest guidance is broader than this, stating that employees can be furloughed if the employer is struggling to maintain operations due to coronavirus. That is to say, an employee can now be put on furlough simply because there is not enough work for them to do, not merely because of COVID-19 infection or restrictions.
The new guidance also makes it clear that the purpose behind the CJRS is to allow employers to retain their staff during the pandemic by way of protecting the economy. Essentially, the government is recognising that although the CJRS is open to all UK businesses, the impacts of coronavirus on each one will vary dramatically.
It appears that employers do have some discretion, but of course they should adhere fully to the guidelines. See the latest CJRS updates from the government.
Can employers begin a redundancy procedure, or give an employee notice of redundancy, whilst claiming under the extended CJRS?
Between the 1st and 30th November 2020, employers were able to give notice to employees and undertake a redundancy consultation whilst still claiming a grant. This was the same as the previous scheme.
However, these dates have obviously now passed and the rule has changed. Since the 1st December 2020, employers have not been allowed to claim for any days during which the furloughed employee is completing a statutory or contractual notice period. This includes individuals who are serving notice of resignation or retirement.
Can employers re-hire staff who were made redundant just before the original CJRS closed?
Yes, usually. Last time, before the Chancellor made it clear that the CJRS would be extended, many employees were unfortunately made redundant who could otherwise have been kept on. However, now if an individual stopped working for their employer or were made redundant on or after the 23rd September 2020, they are able to be re-employed and furloughed.
To be eligible for re-employment then furlough, an employee must have been working for their employer on or before the 23rd September 2020. The employer must also have made a PAYE RTI submission to HMRC between the 20th March 2020 and the 23rd September 2020 on their behalf. If an employee was on a fixed term contract, but that contract expired at some point after the 23rd September, they too can be re-hired and claimed for.
This is all largely good news for employees, but for employers the process isn’t easy. Re-hiring in this way is fraught with legal and practical difficulties, especially as nothing like this has ever happened before. For example, if an employer has already undertaken collective consultation, advised the Secretary of State and forked out for the notice period and redundancy pay, it’s not clear which of these will need to be done again if an employee is re-hired before being made redundant again.
Should furlough be considered as part of an ongoing redundancy procedure?
Yes, because furlough is potentially an alternative to redundancy.
If an employer is in the middle of a redundancy process, they should be able to demonstrate why they didn’t decide to furlough the employee instead. They need to be very clear in their reasoning for redundancy rather than using the CJRS.
Where to find further information
This article was put together by the R&D tax and funding specialists at Myriad Associates. Discover more about R&D Tax Credits and R&D Grants on our website, and how you can partner with us to offer the best R&D claims service possible.