30 March 2020

COVID 19 – Contingency Planning for Employers

As a result of the coronavirus, a number of companies are facing a mixture of cashflow issues, reduction in revenue or even worse, an enforced cessation of their businesses.  As a result, companies may need to take quite drastic action in relation their employees, quite quickly. 

The British Government has taken various steps to help employers manage challenges that they face during the pandemic.  In the first instance, employers should consider whether they can seek relief through legislation and programs introduced by the British Government.  If legislation and programs do not provide employers with a solution, there are options that can be taken to assist in effecting change in the short term, thus enabling the company and employees to return to their normal positions in the long term. 

Read on to learn more about programs introduced by the British Government and options that employers may wish to implement to manage their workforce.

Coronavirus Bill 2019-2021

The British Government published details of the Coronavirus Bill 2019-2021 which sets out legislative measures to assist both employers and employees to address some of their challenges they face as a result of the coronavirus pandemic.  Please see our briefing here which discusses wider, non-employment related measures. 

Unpaid volunteer leave

  • Employees and workers will be able to take emergency statutory unpaid volunteer leave in blocks of two, three and four weeks. 

  • Certain employees who are appropriately skilled and qualified will be able to register as healthcare professionals in order to assist with the healthcare required during the pandemic. 

Statutory Sickness Pay

  • The current Statutory Sickness Pay (“SSP”) arrangements will allow for SSP to be claimed from the first day an individual is incapacitated or when an individual is self-isolating.

Job Retention Scheme

  • A new Coronavirus Job Retention Scheme will enable employers with no work for their employees to claim a grant from HMRC to cover 80% of employees’ salaries, provided that the employees are kept on the payroll rather than being made redundant and “leave” is granted on a temporary basis.  Employees have to be specifically designated as “furloughed” and are not permitted to work. 

  • There is no requirement for the employer to make up the balance to receive this benefit but can of course do so.  

  • Payments under this scheme are capped at £2,500 per calendar month (the UK median wage) for each employee and will be backdated to 1 March 2020. This scheme will be open for at least three months and will be extended if necessary.

  • Employers still need to take appropriate steps to ensure that their employees do not bring claims against them because furloughing is likely to amount to a breach of contract.  In addition, if only some employees are to be furloughed, the employer will need to take appropriate steps to select which employees will be furloughed. 

Other Options To Consider 

In addition to the government schemes, employers may also consider the following contingency measures.

Annual Salary Reviews

  • If the employer is in the process of carrying out salary reviews, or if the period for such review is approaching, implementing a pay freeze (on a temporary basis) as it may help to save costs for the duration of this pandemic. 

  • This might amount to a breach of contract so care is required especially where pay-rises have been communicated to employees.  

Varying Employment Contract Terms

  • Varying employee contractual terms by introducing a pay cut or reduced hours may assist in saving costs. Again, such steps, if taken unilaterally where there is no specific contractual right to do so, would amount to a breach of contract.  

  • Employers should also be wary of implied contractual terms which may cause issues which could ultimately result in employees bringing a claim against their employer. 

  • In the event that an employer does want to vary contract terms, employers should commence consultation (noting that there are UK rules for such consultations) with the relevant employees both on an individual and, potentially, collective basis. 

  • Ideas for variations include a temporary reduction in hours and pay, spreading loss in pay over a period of time or deferring part of an employee’s salary until a later date.

  • An employer may also consider dismissing employees and offering re-engagement on revised terms.   However, great care is required in adopting this approach and the employer should seek legal advice first. 

Requiring Employees to Take Leave

  • An employer may ask employees to take paid annual leave during the pandemic, provided that they give appropriate notice to the employees and with consultation employees may prefer to do so instead of being made redundant.  The purpose here is to ensure a workforce uses up some of their leave entitlement when work flow is low to ensure the company can bounce back when work flow improves.

  • However, employers cannot compel employees to take their annual leave at a certain time, and employees may choose not to do so. 

  • Other options include offering unpaid leave, sabbaticals and training leave.   

Lay-offs and Short Time Working

  • Certain employers may have the ability to impose short-time working (guaranteeing employees a proportion of their salary for some guaranteed work) or a lay-off (enable employees to remain employed (without pay) throughout the lay-off period, with an immediate savings of labour costs, coupled with the flexibility to restore the workforce once the pandemic is over).

  • For those employers who do not have this ability in the contract of employment, then consultation will be required for employees to agree the change in contractual terms.

  • It should be noted that even where there is a contractual right to lay-offs, employers will need to take additional steps, including a consultation with employees.

Redundancy 

  • As a method of last resort, employers may need to dismiss employees on the ground of redundancy.  However, this may not be the most practical solution as it can be costly, brings with it a risk of claims and will have a long-term detrimental effect.

  • Employers have to comply with various requirements including for example consultation on an individual and, potentially, collective basis and other notification and procedural requirements.  

  • Depending on the number of proposed redundancies, such consultation would need to commence between 30 and 45 days before the first dismissal and failure to comply could result in a protective award of varying levels. 

Conclusion

In such uncertain times, its best for employers to be as open and honest with staff as possible. To encourage employees to work alongside employers, employers should demonstrate that any proposed changes are to apply to all staff, including management. If measures are temporary, employers can also retain enough flexibility to ensure that arrangements can be reversed on short notice. 

Redundancy may be expensive and a method of last resort for employers, therefore, employers should attempt to initially be innovative with workstreams in order to try and utilise the workforce as best as possible, rather than loosing experienced and talented staff. Employers should also work alongside core departments to determine whether reliance on the 80% contribution from the Coronavirus Job Retention Scheme and the other additional applicable benefits mentioned above can enable them to keep employees on their role. 

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