Addressing headcount and redundancy during the COVID-19 outbreak
18 Mar 2020 |
7 minute read
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Given the anticipated knock-on impacts of wide-scale business disruption caused by the COVID-19 outbreak, many employers are naturally looking carefully at what they might be able to do either on a temporary or longer-term basis to effectively manage headcount.
Below, I've laid out some common measures being looked at. If you have other questions, why not sign up for the COVID-19 employment webinar I'm running on Tuesday with Karen Bates?
Perhaps one of the easiest immediate measures to consider would be around inviting employees to make use of holiday entitlement to align with any period of reduced business and/or closure.
If individuals are willing to take accrued annual leave entitlement, then there is no issue with this. Employers should be aware however that in order to force an individual to take leave, it would be required (under regulation 15(2) of the Working Time Regulations 1998) to give the worker notice (ordering the worker to take statutory holiday on specified dates) of at least twice the length of the period of leave that the worker is being ordered to take.
If an employer wishes to permit an individual to pull forward annual leave from a future holiday year, then they must also be conscious of the fact that this may cause problems later on down the line (with the employee then being deemed not to have been provided with their full statutory leave entitlement in that next holiday year).
Seeking to make unilateral changes to the contractual pay and/or hours entitlement of staff runs the risk of breach of contract, unlawful deduction from wages, and constructive unfair dismissal claims being raised against the business. Changes in this regard therefore should only realistically be implemented with the agreement of affected staff, or as expressly provided for under their contract of employment. It is perhaps worth bearing in mind that staff may well be more willing to agree to some form of temporary adjustments to pay and/or hours if the reasoning (and rough expected duration) are well-explained, and it is clear that such a step amounts to the 'lesser of two evils' (i.e. that it is an alternative to the potential need to implement formal job cuts).
Whilst the term 'laying off' employees has a different meaning in other parts of the world, within the UK, the term is used to describe the situation where employer provides employees with no work (and no pay) for a period while retaining them as employees. The term short-time working on the other hand means providing employees with less work (and less pay) for a period while retaining them as employees.
Unlike dismissal, such measures are a temporary solution (i.e. as opposed to having to make redundancies) to the problem of no or less work caused by an unexpected downturn in its business or unforeseen circumstances.
Typically, lay-off and short-time working are used in sectors such as manufacturing, and often for certain types of worker, such as those working on the factory floor or piece-workers. They can only legitimately be used however where there is an express contractual right to do so (whether in a contract of employment, an agreement between the employer and the relevant union, or a national agreement for the relevant industry).
Where you as the employer temporarily close down (or impose substantially reduced hours) at a particular site or place of business therefore, the general position will be that the employee (if they are otherwise willing and able to present themselves for work) should get full pay, unless their contract allows for unpaid or reduced pay during temporary lay-offs. If an employer does not pay the employee their full pay, then the employee will be entitled to guarantee pay or statutory lay-off pay.
There is no limit how long employees can be laid off for or be put on shorter time working, but an employee can claim redundancy pay if it has been four weeks in a row or six weeks in a thirteen-week period.
One step that a lot of business may also consider is that possibility of retracting any job offers where candidates have been offered a role but have yet to start. This should however be treated with a degree of caution as there will be implications depending on whether the job offer in question has already been accepted or not.
If the candidate has yet to accept the offer, then the likelihood is it can simply be withdrawn without further ado. If they have already accepted, however, (and the offer wasn’t subject to other conditions etc), then a contract of employment will be in existence, so the only way for the employer to terminate the contract is to give the individual the notice to which they are entitled under the contract.
A failure to do so would amount to a breach of contract. The individual's loss in respect of such a breach of contract though will normally only begin to accrue after the date on which their employment was due to start (because the individual will not generally have been entitled to any benefits before they start work). Therefore, if the individual has a four-week notice period provided for under the contract, but the employer wrongfully terminated the contract one week before the employee was due to start work, damages would normally be limited to three weeks' earnings.
At the more extreme end of the scale, and in the absence of any less drastic steps, it is likely that many employers may have to make the difficult decision to make permanent reductions to headcount.
Bringing to an end the employment of any employee still under their probationary period (or potentially even those with under two years of service) may well be an appealing option considered by some businesses as an initial step, and whilst this might on the face of it appear to be a low-risk option (given the reduced scope for unfair dismissal complaints flowing from this), there are still potential dangers arising from any such strategy.
One obvious potential danger would be the risk of possible discrimination complaints (depending on the criteria used to determine which individuals are selected). Unless the Government were to relax the rules, however, then an equally big consideration in this regard would be the collective redundancy consultation requirements under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992.
Those collective consultation requirements (which are complex and have important commercial consequences) will apply where there is a proposal to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. Where they apply, then the duty is to inform and consult appropriate 'representatives' of the affected employees, and to notify BEIS of the proposed redundancies.
Where a trade union is recognised, then the employer must consult with that trade union, but otherwise, directly elected representatives are required (and there are specific statutory rules governing the election and the adequacy of representation produced by that election).
Certain minimum time periods also apply depending on the scale of the redundancies proposed. Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For fewer than 100 redundancies (but more than 20), the minimum period which must elapse is 30 days. As a minimum, consultation (with the elected representatives) must be undertaken with a view to reaching agreement on ways and means of avoiding the dismissals, reducing the number of dismissals and mitigating their consequences.
Where 'special circumstances' render it not reasonably practicable to consult in good time or provide the appropriate information, the employer need not fully comply with the duty, but must still take such steps towards compliance as are reasonably practicable. The term 'special circumstances' however has always been very narrowly interpreted, and whilst the situation currently facing the UK is unprecedented, it is unclear how much flex there will be for employers to bend the rules in this regard. This is highly significant, because failure to comply with any of the rules on information or consultation, or on the election of representatives, can lead to a 'protective award' being made by an employment tribunal of up to 90 days' gross pay for each dismissed employee (based on the seriousness of the employer's default).
Redundancy and reduced headcount is of course an upsetting prospect and not something that employers relish. If you need an experienced advisor by your side to help you manage the size of your workforce in the least disruptive way possible, our Employment Team is on hand.
