Who pays the redundancy?










The furlough period is drawing to an end, although there is is the possibility that targeted furlough support may be retained by sector. The economic impact of this has been eye watering. To satisfy employment law and the consultation periods for redundancy, clients are being approached and told by suppliers that if the employment costs are not underwritten by them then redundancy is the outcome; applications by suppliers for the cost of redundancy are also being made.

This is a time to be cautious. The client is not the employer of these resources and is not automatically liable for the costs of redundancies. In the main, the client purchases a service with clearly defined outputs, and the supplier provides the resources to achieve these service outputs. Therefore the employer of the resources is the supplier and so is the liability of redundancy. In determining your response to the suppliers applications:

  1. Consider what the resources have been doing during lock down. If the resources were brought back from furlough, or not put on furlough by the supplier and used elsewhere, then the likelihood is that the link to you as the client has been broken, as the resources have been providing services outside of the contract you have with that supplier. This means that any contractual commitments made by the client to the supplier regarding the underwriting of redundancy costs may no longer apply.
  2. Be aware of an increasing momentum behind the use of Force Majeur as a reason for cutting FM services and therefore the obligations of contract would be negated.
  3. Consider your overall service strategy before engaging in any localised contractual agreement. If you are in the process of re-imagining FM for the future, now is the time to consider the most cost effective operating model.

Redundancies on a large scale within FM are inevitable, and the need for client FM teams to safeguard the interests of their business has never been more real. Ensuring the costs of any redundancies are allocated to the supplier where it is right to do so, makes sense. The furlough scheme has kicked this particular can down the road, but now it is time to proactively face the redundancy and resourcing challenge

The Stop and Think! team has been open with the market about the operational cost reduction expectation of business (30%), which inevitably means redundancies