Five Ways to Avoid Redundancies During The Coronavirus Crisis

Five Ways to Avoid Redundancies During The Coronavirus Crisis

March 19, 2020, Covington Alert

• The speed and severity of the current crisis means UK employers face very difficult and pressing decisions.
• Some intermediate steps can be taken to preserve workforces for a period and avoid immediate redundancies.
• Some form of individual or even collective consultation with employees or their representatives may be necessary. This can be used as an opportunity to seek creative, collaborative solutions to preserve jobs in the short-term.
• We set out a checklist of potential measures below.

1. Freeze Headcount

What to consider:

• No new hiring.
• Withdraw existing job offers.
• Defer new joiners.

Legal issues: Ensure no discrimination in selection of applicants for withdrawal or deferral. If withdrawing a job offer that has been accepted, and any conditions have been met, the applicable notice period must be paid out. For deferrals, employee consent is required; consider offering compensation as an incentive, and document in writing any varied start date.

2. Reduce Contingent Workforce

What to consider:

• Terminate agency staff.
• Consider reducing / eliminating independent contractors.
• Defer or suspend hiring of casual or seasonal employees.

Legal issues: Ensure no discrimination in selection of temporary agency staff terminated. Assess business needs for independent (self-employed) contractors, as these are often skilled / specialist staff. If surplus to requirements, vet their status to ensure low risk of claims for employment status (misclassification), and terminate with contractual notice. These staff would not have unfair dismissal claims and would not count towards collective redundancy consultation thresholds. Casual or seasonal employees do count towards such thresholds; if possible, suspend any seasonal or casual employee hiring, and redistribute work to existing employees.

3. Employee Absences

What to consider:

• Enforced holiday.
• Voluntary temporary unpaid leave.
• Sabbaticals / career breaks.

Legal issues: Employers can require employees to take (paid) holiday, provided adequate advance notice is given (usually twice the length of time the employer is making the employee take). If shorter notice is needed, seek written employee consent to this. Unless there is a contractual right to do so, unpaid leave will require employee consent. Unpaid leave would be a short-term measure, as an alternative to immediate job cuts. A sabbatical (also needing employee consent) would be a longer-term ‘career break’; this may need further documentation, as it is a more complex arrangement.

4. Reduce Remuneration

What to consider:

• Reduce / defer / cancel bonuses or other variable compensation.
• Salary freeze.
• Pay cuts.

Legal issues: Review bonus arrangements to see if they can be modified. Legally, this is a complicated area, and the scope for action depends on whether the bonus is fully or partly contractual, whether any applicable targets have been met, and how far the bonus is being cut. Assess commission, incentive and share scheme plans and awards to establish any grounds to defer or reduce payments. Cancel the grant of any new annual bonuses or share scheme awards. Provided there is no contractual right to an upward salary review, freeze salaries. In tougher circumstances, seek to reduce employees’ pay, initially for a temporary period, subject to further review. This would require employees’ consent in order to avoid breach of contract or unlawful deductions from wages claims. Appropriate adjustments to some benefits e.g. pension contributions, would also need to be made.

5. Reduce Hours / Work Activities

What to consider:

• Overtime bans.
• Part-time or flexible working.
• Short-time working.
• Redeployment / retooling.

Legal issues: If paid overtime is common, reduce or eliminate this. Check to ensure there is no contractual right to overtime, whether collectively or in individual contracts; if so, trade union or employee consent may be required. If stronger measures are needed, consider reducing employee hours (and therefore pay) by introducing new schedules or shift patterns. Employee consent will be required; this is usually given if the measure can save jobs. Be clear how long the change will last, and when any further review will happen. Be consistent and fair in how you apply the measure, to increase employee buy-in and to avoid any discrimination allegations. If you have the contractual right to do so, consider introducing short-time working. This system is rare outside the manufacturing sector, and provides employees with guaranteed payments in some circumstances while working reduced hours. Specialist advice should be taken if seeking to operate short-time working. If there is a temporary need to move staff from one (quiet) part of the organization to a busier area, employee consent to such a redeployment may be needed. Check the employment contract to assess the scope of duties / mobility clauses; consider any retraining that might be required.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Employment and Employee Benefits practice.