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This is a truly exceptional and unprecedented time for all organisations, and you will already be thinking about the measures that you may need to implement in order to safeguard the future of your business. Taking steps now, even as a contingency, could be crucial in getting through this challenging period.
We have outlined below some of the options that exist in a situation of this nature:
GOVERNMENT SUPPORT – announcements are being made daily about various financial measures introduced by the Government, whether it be an opportunity to recover Statutory Sick Pay or grants and loans to help businesses during this critical period (Government link here). Utilise these to the fullest extent and communicate any impact on your business, with your staff.
LAY OFF – not to be confused with redundancies but lay off refers to a situation where an employer provides employees with no work (and no pay) for a period while retaining them as employees. They are effectively on unpaid leave for a temporary period. This is a measure often used when the downturn in work is expected to be short-term. Ideally the right to lay off is set out in the contract of employment and if it isn’t, generally speaking you would need the consent of the employees concerned. There are significant legal implications if you impose this measure without consent. Note also that after 4 weeks, an employee has the right to seek a redundancy payment, with the effect of bringing their employment to an end.
SHORT TIME WORKING – is where you ask an employee to reduce their contractual hours, again for a temporary period of time, with a corresponding reduction in pay. For example, asking somebody to work 3 days a week, instead of 5, and reducing their salary accordingly. The same principle as above applies here in respect of having the contractual right to do so and needing consent in the absence of that.
TEMPORARY SALARY REDUCTIONS – it is open for you to ask employees to consider a temporary reduction of pay to help the business navigate through the next few months. This would clearly need the consent of the employees concerned and would be open to discretion as to the amount of the reduction, and for how long. For example, the top earners could take a pay reduction of 20% and the lower earners, 10%. You also have the option to offer to make up the shortfall at a later point.
COLLECTIVE REDUNDANCIES – if you are proposing to make 20 or more employees in the same establishment redundant, within a 90-day period, it will trigger collective consultation obligations which has additional legal implications. In particular, there is a minimum period of consultation that ordinarily must be observed and a financial penalty if this is not met. Likewise, there will be consultation obligations if you are proposing to change terms of employment. This is a complicated and very technical area and one where legal advice should definitely be sought.
REDUNDANCIES – it is obviously open to a business in these times to consider making employees redundant. The difficulty with a situation like this is that it could be a hasty and premature step if this turns out to be a short-term crisis. The problem is that these truly are unchartered territories for businesses in the UK and indeed, around the world. From a legal perspective, employees with less than 2 years’ service have no entitlement to a statutory redundancy payment and provided their dismissals take effect at least a week before they accrue 2 years’ service and are due to redundancy, they will have no right to claim unfair dismissal. For employees with over 2 years’ service, they have a right to claim unfair dismissal which means that you will generally need to consult and comply with the legal requirements of carrying out a fair redundancy.
SICK PAY – there is currently ambiguity about whether employees who are self-isolating are entitled to paid sick leave. If an employee is unwell, then the situation is relatively straightforward – your normal sick pay rules should apply. If somebody is self-isolating on the basis that they have chosen to do so, but are fit and able to work, then it is arguable that they are not entitled to sick pay. The Government has however indicated that employees who are isolating as a result of adhering to their advice, or advice from a GP / NHS 111, will be eligible for Statutory Sick Pay. For some businesses, Statutory Sick Pay can be recovered for up to 14 days where covid19 related. Further details are pending. This may also be a time to review your occupational sick pay scheme and how that might apply in the context of this situation.
HOLIDAY – as a means by which to mitigate the financial impact this situation will have on your employees, there is the option to ask employees to consider utilising some of their holiday entitlement during periods when they might otherwise be laid off without pay. You would need to consider what accrued entitlement exists and again ideally obtain the agreement of the employees concerned.
OFFERS OF EMPLOYMENT – in addition to a recruitment freeze, you may also want to consider whether to withdraw offers of employment or alternatively defer the start date. This is important in the context of redundancy, as a business is under a duty to consider whether it has any suitable alternative employment. If offers have been made, but not accepted, these can be withdrawn with minimal implications. If offers have been made and accepted, they can still be rescinded albeit with the potential for a damages claim, arguably limited to the period of notice that would have applied once their employment had commenced.
In our experience, a key issue in respect of the above is regularly communicating with your employees and being open about the reason for the measures you are introducing.
As you will appreciate, whilst we have outlined options and some of the legal implications, this note does not constitute legal advice as each situation will be different and commercial considerations will no doubt dictate what you as a business ultimately decide to do.
Sherrards is here to support you should you need specific assistance.