If any year has been one for looking at alternative ways of doing things it has been 2020. Adapting to the fluid situation that we all now find ourselves in has become something of the norm. As the Government's job retention scheme begins to wind down many employers are considering what their workforce will look like going forward and if redundancies are going to be needed. We know consideration of alternatives is part of a fair redundancy procedure but now more than ever employers should be thinking outside the box.
Given the severity of the economic downturn, relying on natural wastage (letting employees leave without replacement), pay or recruitment freezes or withdrawing job offers are unlikely to be the answer for many employers. But redundancy has a cost both in direct financial costs and in the loss of experienced staff who may not easily be replaced. If there is the possibility of an upturn in the short to medium term retaining employees on the books may be the pragmatic approach. How can this be achieved?
- Continue to make use of furlough for eligible employees. This is an obvious short term option. However employers will need to consider other possibilities before 31 October or earlier if they cannot afford to pay the gradually increasing contributions towards employees' costs from August;
- Review whether other government assistance made available during the current crisis could be utilised. For example, having regard to the Government's job retention bonus, if you know you are going to retain at least some of your furloughed employees after January 2021 does the benefit of being paid £1,000 per furloughed employee who you retain until then enable you to keep on some other employees who you might otherwise make redundant?
- Consider if other overheads could be reduced before headcount;
- Implement a lay off. Lay off requires the employer to have a contractual right to lay off, and the contract should make clear that employees will not receive salary during this time. However, many employers will not have such a clause in place. If not any proposal to lay off will need to be consulted upon and will require the agreement of the employees. However, employees may (after 4 consecutive weeks or a total of 6 weeks out of 13 weeks) serve written notice that they intend to claim a redundancy payment (thereby terminating their employment) although in certain circumstances this can be prevented via the employer giving counter notice. Employees can also claim a statutory guarantee payment for up to 5 workless days in a three month period. The maximum rate for a statutory guarantee payment is currently £30 per day;
- Implement short time working. A contractual right is also required to implement short-time working. As with lay off, in the absence of such a contractual right, consultation and the agreement of employees will be required. As with lay off employees can serve notice of intention to claim a redundancy payment, and are entitled to a statutory guarantee payment;
- Make temporary or permanent reductions in pay and benefits. It is open to employers to cease the provision of discretionary, non-contractual benefits but the severity of the current downturn is likely to require more. Any changes to contractual benefits will require the express consent of the employees (evidenced in writing) as will any changes to pay;
- Reduce hours or change to zero hours contracts. Again this will require the express consent of employees (evidenced in writing) and could be permanent or temporary;
- Vary contracts so employees can undertake work for another employer on a temporary basis if not currently permitted. This is something that can be used in combination with other options such as periods of unpaid leave;
- Agree an unpaid sabbatical or career break. Some organisations will already have sabbatical or career break policies in place but, if not, they can be introduced. Level of uptake will vary depending on employees' personal and financial circumstances as well as the wider economic climate. Assuming the contract of employment continues during the break holidays would continue to accrue and would need be taken, and paid, during the year in which they accrued;
- Make alterations to pension schemes or employer contributions to schemes. This can be anything from taking an employer pension contribution holiday to closing a final salary scheme. However, most changes require consultation with employees or their representatives, approval of the scheme trustees and must be permitted under the terms of the scheme;
- Ensure any employees eligible for income protection support (PHI) or ill health early retirement access it;
- A combination of some of the above.
This list is by no means exhaustive. While the majority of the options will require consultation and consent in the current climate employees may be more inclined to agree to changes than they would normally be. With the fast changing nature of the current situation employers would be wise to retain the flexibility to alter any new arrangements at short notice.