Coronavirus has forced unprecedented economic conditions upon most businesses, putting many in the unwelcome position of having to rationalise costs. Part of this review will include reducing hours, cutting salaries or even making redundancies.
The Chancellor Rishi Sunak has announced a Coronavirus Job Retention Scheme. This involves government grants for up to 80% of salary of employees who would otherwise be laid off and are ‘furloughed’ up to £2,500 per employee, backdated to 1 March. Being furloughed means that employees would be kept on the employer’s payroll, rather than being laid off.
While few details are available as to how the job retention scheme will operate, we do know that:
- Businesses need to register to be part of the scheme
- Consultation is required with employees who a business needs to furlough, unless there is specific contractual provision to allow this
- Employees on furlough are not allowed to work whilst under these arrangements
- Dismissed employees do not qualify
- For organisations who may already have reduced their employees’ salaries, it is unclear whether or not the government will subsidise the pre-reduction or only the post-reduction salaries.
If your business is facing these concerns, it is important that employment lawyers and HR professionals are involved as early as possible in any decisions that might be taken. Wherever you are seeking to change someone’s contractual entitlements or terms and conditions, you will need to consult with your people and to jointly assess longer-term gain against short-term pain.
Avoiding redundancies
There are a series of options that businesses can explore:
- Be open with your people about the challenges your business is facing as early as possible
- Encourage your people to help you come up with plans and strategies for your business’ future sustainability
- Manage your poor performers
- Conduct your annual review and ongoing performance management conversations thoroughly and record them well
- Audit your business’ expenses: significantly reduce or stop spend including overtime
- Speak to your suppliers to see if you can reach mutually agreeable terms for restructuring your payments
- Temporarily reduce your company’s operational hours and your people’s working hours – if you don’t have lay-off clauses or a short-time working contractual right in your contracts, consultation is required
- Stop all recruitment activity
- Suspend any pending pay increases, freeze or even reduce pay. Check your contracts before doing this
- Promote the use of sabbaticals
- Speak to individuals who are nearing retirement about their plans to see if voluntary retirement is an option
- Review any fixed-term contracts that may be coming to an end
- Review whether people can be redeployed or retrained to do other areas of work
- Understand and map your business’ talent so you have a succession plan
- Invest in and reassure your top talent
Redundancy considerations
Redundancy situations arise when the business is about to or intends to stop trading, or when the business needs for a particular area of work stops or declines. In these circumstances, employers are generally required to consult with their employees or their representatives before any changes can be made. Typically, this would involve:
- Ensuring that your people have been told in advance of the potential for redundancies to be made
- A period of consultation to discuss the situation
- Defining/agreeing and applying objective selection criteria fairly
- Looking for alternatives to losing people
The right to redundancy payments is predicated upon an employee having been employed continuously for at least two years at the point of redundancy, i.e. the person’s last date with the company. The UK Government website has a statutory redundancy pay calculator here.
If your business is intending to make 20 or more employees redundant within a 90 day period or where there is a recognised trade union, it must consult with employee representatives and observe any consultation periods as defined in the Trade Union and Labour Relations Consolidation Act 1992. You will also need to notify the government using an HR1 form.
Where a business needs to make an individual redundant, it should still consult with that person in a fair and reasonable timeframe.
Inviting voluntary redundancies can serve to mitigate risk against a company and to avoid pooling and applying criteria to groups of people.
Risks that you should also be aware of include heightened protection for employees who are on maternity, adoption or shared parental leave and claims of unfair dismissal or discrimination should any pooling criteria not have been fairly applied.
Our recent article on coronavirus and employee tax has information on the tax implications of redundancy.
HR planning and ‘housekeeping’
To minimise disruption as the coronavirus situation develops, you or your HR team should ensure that you’ve taken the following actions:
- Ensure your people’s contact and emergency contact details are up to date
- Review and communicate your business continuity plans
- Set up clear mechanisms for communicating with your people, e.g. intranet, SMS, email, Microsoft Teams
- Ensure your leadership team set an example
- Publicise and remind the business of support mechanisms you may have in place, e.g. employee assistance programmes, healthcare
- Support people with working from home where possible
- Train people on systems that allow homeworking
Find out more about our HR consultancy services to businesses here or get in touch using our enquiry form.
