Employment Focus | Post furlough: Options for employers


The end of September saw the Government Coronavirus Job Retention Scheme (“the Scheme”) come to a close. Whilst for some employers things are getting back on track, for others the changes to pre-pandemic levels of activity remain.

In light of this, we take another look at some of the options open to employers where change may be required in order to deal with any ongoing disruption and uncertainty:

Proposing changes to terms and conditions

Employers may seek to vary certain contractual terms such as employees’ hours or pay. When proposing a change to terms and conditions of employment, gaining express consent is the first step. During such discussions, employers should remain transparent with employees about the reality and ongoing impact that the coronavirus pandemic has had on the business, which has initiated the need to propose such changes. If employees are not open and honest, or if they unilaterally impose a change, this may amount to a breach of contract. Such a breach may result in the employee resigning, meaning employers make themselves vulnerable to an unfair dismissal claim (where employees have the requisite two or more years’ service).

If employers cannot gain express consent and employees refuse a change in terms and conditions, the next step would be to terminate and re-engage on the new terms. This action would amount to a dismissal (for the purposes of unfair dismissal) if the employee has two or more years’ service, and so employers would need to follow a fair process and show that the motivation for such changes was reasonable.

The other important consideration here is that where an employer proposes to terminate existing contracts if changes are not accepted, and 20 or more employers are affected, certain collective consultation obligations could be triggered.

Temporary Stoppages

Another option is the adoption of temporary stoppage arrangements to avoid having to implement redundancies. Some examples of things to consider include:

Sabbaticals

Whether this will assist will depend on a number of factors, including employees’ personal and financial circumstances and the overall effect of a sabbatical on job security and future job prospects. However, if it would help it could be worth raising it as a possibility as you never know individual circumstances and wishes. That being said, in the current context a sabbatical for someone who may be in a position to take it may still not be as an attractive option as it might ordinarily be.

Unpaid leave

Arranging for employees to take periods of unpaid leave is another way of stopping or reducing work temporarily. Such leave is likely to be shorter than a sabbatical, but many of the same factors will be relevant. Consent will be required unless an employment contract (or collective agreement) allows an employer to place employees on unpaid leave. Any restrictions in any existing policies could be waived to encourage take-up.

Holidays

Employees could be required to take their contractual or statutory annual holiday allowance at quiet times. This will be subject to giving the required notice under the Working Time Regulations 1998, which is double the length of the holiday to be taken. Employees will still be entitled to their normal remuneration whilst on holiday.

Overtime bans

Where there is no entitlement in the employment contract to overtime work, it is straightforward for employers to cease offering such provision to save outgoings. However, where a contractual right to overtime work is in place, the employer must obtain consent of employees to stop offering overtime.

When considering imposing such a ban, employers need to consider the effect of this implementation on its workforce, for example whether more women than men are dependent on overtime work. Employers should also seek to retain the right to reverse any ban if the need arises to reinstate previous overtime provisions.

Redeployment or secondment

Moving employees around the business is another option if there is a reduced requirement for the particular kind of work they carry out and they would otherwise be redundant. Redeployment, retraining or a secondment placement can be considered where an employer believes an employee is at risk of redundancy.

This is something employers would need to consider as part of a fair redundancy consultation process anyway, so looking at options in order to avoid having to go down that route could be a pre-emptive step. Employers will need to consider whether an employment contract contains a mobility and/or redeployment clause, which enables them to require employees to move around the business. If this is not present, they will need to ensure that express consent is obtained to make these changes.

Lay off and short time working

Lay off

With the Scheme having come to an end, lay off may be an option where there is a contractual right to do so. The contract should make clear that employees will not receive their normal salary during this period. Otherwise, any enforced lay-off will amount to a repudiatory breach of contract entitling an employee to resign and claim constructive dismissal and, where no pay is provided, an unlawful deduction from wages. If there is not a contractual right to lay off, then any proposal to lay off will need to be the subject of consultation with employees and will require their agreement.

Short time working

Another effective way of avoiding redundancies whilst guaranteeing work for employees is short time working, which reduces working hours and usually has a corresponding reduction in pay. Notwithstanding that this means employees earn less remuneration than they have previously received, they are more likely to accept this as an alternative to redundancy and the permanent loss of a job.

To implement short time working, employers must have a contractual right to implement such measures. If this is not the case, they must seek express agreement from employees to agree to the change in terms.

It is important to note that employees may be entitled to certain statutory guarantee payments if they are on lay off or short time working.

General headcount reduction

Employee costs are often the highest single item of expenditure. In times of difficulty it can be hard to resist the temptation to cut headcount as a quick fix to spiralling expenditure and ongoing reductions in demand. However, such short-term measures can affect long-term prosperity. Once lost, a talented, experienced employee can be hard to replace when business improves. In addition, staff morale may be affected and reputation damaged. Other measures that might delay having to take such steps include restricting recruitment, withdrawing job offers, deferring new joiners, and reducing non-permanent staff.

Redundancies

If the above measures cannot be adopted and redundancy is deemed to be necessary, employers must be satisfied that the statutory definition of redundancy applies before consulting with employees and taking action.

Following this, employers need to establish a fair and objective procedure, which includes the selection process where applicable. Where an employee has two or more years’ continuous service, this fair procedure must include consultation with individual employees. Where employees do not have two or more years’ continuous service, employers are required to give employees their specified notice period, which may include payment in lieu of such notice.

Once again, if employers are proposing to make large scale redundancies of 20+ employees within a period of 90 days or less, certain statutory rules in relation to collective consultation will apply. In brief, this will include the requirement to consult with representatives of the affected employees and to notify the Department for Business, Energy and Industrial Strategy.

Whilst there were calls to extend the Scheme, the 30th September deadline remained unaffected and so the above options remain as the alternatives in place for organisations still affected by the impact of the pandemic.

If you would like any further information in relation to the topic covered in this focus, please contact a member of the Employment team.


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