Published 23rd March 2020
With the current uncertainty and anxiety about the economy, many companies are giving serious considerations to whether they can continue to employ their staff, or whether there are short term and temporary solutions which may allow them to keep the staff “on the books” but not pay them for the time being.
Here at Thrive, our view is that at the moment, employers should wait (if they can) and give serious consideration to what the Government is offering in terms of support for companies at the moment. Short time working and layoffs can damage morale and trust and confidence in employers, so employers should try and look at them as a second-to-last resort (with redundancies as a last resort).
Differentiating Between Layoffs and Short Time Working
It is helpful to think of short time working and layoffs as reserving the right not to pay or to vary pay to employees, even if they’re ready and willing to work.
A layoff is, in practice, a form of temporary redundancy (without the redundancy payment), whereby an employer informs their employees that they no longer have work for them, and as such they may be directed to stay home on unpaid leave, this should be only for up to 4 weeks.
Short time is where an employer indicates that they have less work available than anticipated. This could mean that employees may have to work less than regular contracted hours (for example a three-day week). That employee’s salary would then be pro-rated in accordance with these amended hours.
In order for an employer to enforce the above, there should be an express contractual clause within an employee’s contract, stipulating that they may be subject to be laid off or put on short time, if required. The term cannot simply be implied, unless there is a custom and practice of laying people off in that particular business/sector and the terms in doing so are clear. You should take specific advice before doing this is you are not sure, to reduce the risk of any claims against the business.
Breaking Down A Complicated Process
If an employee is subject to a lay off or short time working, they will still be entitled to a guarantee payment, this payment equates £29 per day (this figure will rise up to £30 on 6 April) and is only available for a maximum of five days for guaranteed payment within a rolling three months period, meaning this would equate a maximum payment of £145 over three months.
Even where you have the clause, you must exercise this with reasonable care and skill. Make sure you speak to staff, explain what this means to them, how long it will last, what they will be paid (if anything) and set a review date, if possible.
If an employer sends an employee home on this basis (whilst unpaid) and their contract of employment does not include a layoff or short time clause, there’s a good chance of this being a potential constructive dismissal claim (if they have been employed for more than 2 years).
However, we wouldn’t recommend employees pursue this route under present day circumstances, as it will be increasingly difficult to find employment within these next few months.
We would recommend that employees do not resign but rather stay in employment and negotiate with their employer for any unlawful deduction from wages, as an employer may have reasonable and proper cause to send people home in the circumstances above within this current climate.
If you don’t have a layoff clause, but want to introduce this, you must do so with reasonable notice and try to get the agreement of staff as it may amount to a fundamental variation to their contractual terms, entitling them to resign, and where eligible, claim constructive dismissal.
Important Time Limits
If an employee is laid off or put on short time for a period of 4 consecutive weeks or for 6 weeks in a rolling 13-week period, an employee is entitled treat themselves as dismissed on grounds of redundancy. A payment for statutory redundancy will be made available but only if the employee in question has been employed for more than two years. If an employee qualifies, they must send a letter within 7 days of hitting the mark (in relation to the 4 consecutive weeks or the 6 weeks in a rolling 13-week period) stating that they intend to claim a redundancy payment.
If no action is made within 7 days of an employer receiving their letter, an employee is entitled to resign within the space of 3 weeks from there onwards. However, an employer could serve a counter notice within 7 days of receiving their employees’ letter. This counter notice would be based on the condition that within the next 4 weeks, an employee could expect to return to normal working hours for at least 13 weeks. This would, in turn, stop an employee from getting their redundancy payment.
If an employer was not true to their word regarding the employee’s working return, an employee can approach an Employment Tribunal to dispute this in order to decide if they may get a statutory redundancy payment.
If an employer files for a counter notice without believing this to be true, with the intent to avoid paying statutory redundancy payments, an employee could resign by way of breach of mutual trust and confidence; this would allow them to claim both constructive dismissal and the redundancy payment. In terms of additional compensation, this is unlikely to be awarded as the basic award will be the same as an employee’s redundancy award which they would/should have received.
What Action Can Be Taken by Employers?
If an employer does have a lay off clause in an employee’s contract, this would allow them the ability to lay off members of staff for short periods of time.
If an employee agrees in a reduction to their working hours for a defined temporary period, it is important for employers to confirm their exact working hours, as well as the start date for such varied arrangements and when employees will be set to return to their normal/previous working hours. It is also important that employees are made aware of how their pay will be affected during this uncertain time.
However, there are other options available to employers; we would advise that the best approach would be to reduce working hours as a short term measure and agree it with staff on a temporary basis; it should be explained that this is a precautionary measure to avoid companies having to make redundancies and ensure that everyone can continue to be in receipt of their salary/wages, albeit it a slight deduction which should be understandable given the current situation. We suggest agreeing reviews as the situation develops and clearly communicating this to your team.
Employers should also consider that people may have to take unpaid leave as a result of school closures and having to care for their children as of Friday 20 March 2020. This in turn may take the burden off employers if working from home is not an option for employees. A different approach could be to ask employees to take annual leave and it may be possible to offer early retirement to volunteers (subject to complying with age discrimination provisions).
If you have any questions or concerns regarding the coronavirus, email your queries to email@example.com. If your question is regarding your workforce and any future changes it is set to face, please do get in touch!
Written by the Thrive Tribe.