As discussed in Part I of this newsletter series, (available here), in the event that there is a short-term post-furlough economic decline, employers may be tempted to reorganise their businesses and make redundancies in order to reduce expenditure. However, redundancies may not be the ideal solution to the current situation as any post furlough economic decline may be short lived. Making permanent changes to the business’ structure through redundancies may mean employers do not have the capacity to satisfy their clients’ business needs once economic circumstances improve. This newsletter will explore ways of reducing the amount of work done, and reducing the pay and benefits of employees.
How do we reduce the headcount in our business without making redundancies?
1. Hiring freezes
This means temporarily halting the recruitment of any non-essential hiring of personnel to reduce costs. As part of any fair redundancy process, employers must offer potentially redundant staff suitable alternative employment within the business before they are dismissed. This may prove a good opportunity for employers to provide employees with the option to work in an alternative role to which they were hired, and avoid dismissal. Alternatively, employers may wish to explore the possibility of redeploying staff in existing (perhaps newly vacant) positions, before redundancies are considered. Any contractual change to this effect is likely to require the employee’s agreement.
2. Withdrawing offers that have been accepted
If an offer of employment has been accepted the employer cannot unilaterally withdraw it, and must terminate the agreement in accordance with the terms of the contract i.e. provide the employee with notice pay. Alternatively, the employer may delay new starters who have accepted their job offer by obtaining the employee’s agreement to delay the start date. If the employer has only made an offer of employment (and it has not yet been accepted), they can simply delay the start date.
Employers can ask employees to take holiday at particular times, however this is subject to contractual provisions and the Working Time Regulations (advanced notice of the requirement to take holiday should be twice as long as the period of holiday you wish the employee to take). If there is a short term dip in work, employers can ask their employees to take annual leave to cover the period, or at least a proportion of it.
Lay-off occurs where an employer asks an employee to not work for a particular period of time, while retaining them as an employee. There is no obligation to pay employees during the period of lay-off, however there must be a contractual right in the contract in order to lay someone off. If there is no contractual right, an employer may ask its workforce if they would consider agreeing to a period of lay-off (perhaps as an alternative to redundancy) and obtain individual employee’s agreement to this in writing.
If a lay-off period continues for too long (over 4 consecutive weeks or 6 or more weeks in a 13-week period), an employee may gain the right to serve notice of termination of employment on their employer and receive a statutory redundancy payment (if they have two years’ continuous employment), which may lead to the business losing its best employees without intending to.
5. Short time working
In our previous newsletter on this topic we discussed the option of laying-off staff during times of economic difficulty. Whereas lay-off involves sending home employees with no work, short time working involves providing employees with less work, for less pay (less than half a weeks’ normal pay to be precise). There is a statutory short time working procedure that must be followed if employers wish to place their employees on short time working.
Just as with lay-off, the imposition of short time working for too long may result in the employee gaining the right to serve notice and terminate the contract themselves (and receive a statutory redundancy payment if they have over two years’ continuous employment). This means the outcome of the break may be out of an employer’s control.
When enforcing changes clear and effective communication is key. Changes are often more positively received by employees when employers are honest and open regarding the business reasons for the changes. If you are unsure as to the contractual status of any scheme, we would advise seeking legal advice.
We are ready to advise and support your business through these challenging times. Please get in touch with your usual 3CS contact to find out more about how we can help.