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Coronavirus: six alternatives to making redundancies

The economic impact of Coronavirus (COVID-19) on businesses will be significant. Employers will need to strike a delicate balance between protecting the solvency of their business and supporting their employees.

2 minute read

Published 18 March 2020

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Whilst redundancies will reduce staff costs in the medium term, they involve significant up-front costs and deprive employers of valuable talent – leaving them less able to take advantage of more favourable market conditions when the Coronavirus outbreak eases.

Our redundancy lawyers suggest six options that could stave off the need for immediate redundancies or reduce the number of redundancies required. This list is not intended to be exhaustive.

(1) Withdraw Job Offers and/or Defer New Joiners

Most Employers are likely to have suspended any recruitment activity. If you have made an offer but it has not been accepted then you can withdraw it without any cost implications, subject to the terms of your recruitment agency of course.

However, unilaterally withdrawing a job offer that has been accepted will be a breach of contract. To avoid such a claim, you would have to pay a sum equivalent to the period of contractual notice that would have been payable on the first day of employment. This might well be a relatively short notice period and a correspondingly small payment if the employment was subject to a probationary period.

Alternatively, deferring a new recruit’s start date will help cashflow but require their consent if the offer has already been accepted.

(2) Lay-offs

Laying-off is where an employer unilaterally requires an employee to no longer attend work for a temporary period. Their pay (for that period) is also reduced to zero.

You should think twice about implementing a lay-off system if there is no contractual right to do so, as it will expose you to claims of constructive unfair dismissal and unlawful deduction from wages.

You should also be mindful that employees develop a right to treat themselves as dismissed by reason of redundancy (and are entitled to the associated redundancy package) if a contractual lay-off extends beyond four consecutive weeks, or beyond six weeks in any twelve-week period. There is a complicated procedure involved – on which (as with all of these matters) we can advise.

(3) Short-Time Working or Introducing Reduced Hours

Short-Time working is a similar concept to laying-off, but is where an employer unilaterally reduces an employee’s hours and pay commensurately, on a temporary basis. As with lay- offs, there must be a contractual right for the employer to make the change, and the employee retains the right to claim a redundancy payment once certain timescales have been reached.

As the prospect of reduced hours (and pay) is likely to be more palatable to employees than the alternative of redundancy, this measure may well be successful if explained clearly and introduced with employees’ written consent.

Your response to any employees who refuse to give consent will need to be considered carefully, as claims are likely to arise if the change is enforced unilaterally.

(4) Redeployment or Secondments

Consider redeploying employees who are less busy or perform fewer essential tasks to areas of the business where there is a maintained or increased workload – supporting them with retraining where necessary and practicable.

If there are no redeployment opportunities internally, consider whether you have relationships with any other business that may have an increased need that your staff could fulfil for a fixed period of time with the third party meeting their salary.

(5) Sabbaticals and Unpaid Leave

Some employees may welcome the opportunity for unpaid time off, particularly those with young children or elderly parents. When international travel restrictions are eased, some may also welcome the opportunity to travel.

If there is not much uptake consider ‘sweetening the deal’ to take unpaid leave with a fixed cash sum incentive to take time off that will still result in significant salary savings.

Any such scheme needs to be introduced using metrics and criteria which are as consistent and as universal as possible to minimise the risk of discrimination claims.

(6) Salary Sacrifice

You could introduce a shorter working week (say a four-day week with an associated 20% pay cut) as a temporary measure. This will require the written consent of all employees to which it applies and should in any event not (as with most of the other measures outlined above) be introduced without some form of detailed consultation and explanation. If you make it clear that the alternative will be redundancy, then many employees may be willing to accept a temporary pay cut as the preferred option.

If you wish to discuss any of these options, or a redundancy procedure, please get in touch with any of our Employment lawyers.

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Longer Reads

Coronavirus: six alternatives to making redundancies

The economic impact of Coronavirus (COVID-19) on businesses will be significant. Employers will need to strike a delicate balance between protecting the solvency of their business and supporting their employees.

Published 18 March 2020

Associated sectors / services

  • Employment law for employers
  • Employment law for employees

Authors

Whilst redundancies will reduce staff costs in the medium term, they involve significant up-front costs and deprive employers of valuable talent – leaving them less able to take advantage of more favourable market conditions when the Coronavirus outbreak eases.

Our redundancy lawyers suggest six options that could stave off the need for immediate redundancies or reduce the number of redundancies required. This list is not intended to be exhaustive.

(1) Withdraw Job Offers and/or Defer New Joiners

Most Employers are likely to have suspended any recruitment activity. If you have made an offer but it has not been accepted then you can withdraw it without any cost implications, subject to the terms of your recruitment agency of course.

However, unilaterally withdrawing a job offer that has been accepted will be a breach of contract. To avoid such a claim, you would have to pay a sum equivalent to the period of contractual notice that would have been payable on the first day of employment. This might well be a relatively short notice period and a correspondingly small payment if the employment was subject to a probationary period.

Alternatively, deferring a new recruit’s start date will help cashflow but require their consent if the offer has already been accepted.

(2) Lay-offs

Laying-off is where an employer unilaterally requires an employee to no longer attend work for a temporary period. Their pay (for that period) is also reduced to zero.

You should think twice about implementing a lay-off system if there is no contractual right to do so, as it will expose you to claims of constructive unfair dismissal and unlawful deduction from wages.

You should also be mindful that employees develop a right to treat themselves as dismissed by reason of redundancy (and are entitled to the associated redundancy package) if a contractual lay-off extends beyond four consecutive weeks, or beyond six weeks in any twelve-week period. There is a complicated procedure involved – on which (as with all of these matters) we can advise.

(3) Short-Time Working or Introducing Reduced Hours

Short-Time working is a similar concept to laying-off, but is where an employer unilaterally reduces an employee’s hours and pay commensurately, on a temporary basis. As with lay- offs, there must be a contractual right for the employer to make the change, and the employee retains the right to claim a redundancy payment once certain timescales have been reached.

As the prospect of reduced hours (and pay) is likely to be more palatable to employees than the alternative of redundancy, this measure may well be successful if explained clearly and introduced with employees’ written consent.

Your response to any employees who refuse to give consent will need to be considered carefully, as claims are likely to arise if the change is enforced unilaterally.

(4) Redeployment or Secondments

Consider redeploying employees who are less busy or perform fewer essential tasks to areas of the business where there is a maintained or increased workload – supporting them with retraining where necessary and practicable.

If there are no redeployment opportunities internally, consider whether you have relationships with any other business that may have an increased need that your staff could fulfil for a fixed period of time with the third party meeting their salary.

(5) Sabbaticals and Unpaid Leave

Some employees may welcome the opportunity for unpaid time off, particularly those with young children or elderly parents. When international travel restrictions are eased, some may also welcome the opportunity to travel.

If there is not much uptake consider ‘sweetening the deal’ to take unpaid leave with a fixed cash sum incentive to take time off that will still result in significant salary savings.

Any such scheme needs to be introduced using metrics and criteria which are as consistent and as universal as possible to minimise the risk of discrimination claims.

(6) Salary Sacrifice

You could introduce a shorter working week (say a four-day week with an associated 20% pay cut) as a temporary measure. This will require the written consent of all employees to which it applies and should in any event not (as with most of the other measures outlined above) be introduced without some form of detailed consultation and explanation. If you make it clear that the alternative will be redundancy, then many employees may be willing to accept a temporary pay cut as the preferred option.

If you wish to discuss any of these options, or a redundancy procedure, please get in touch with any of our Employment lawyers.

Associated sectors / services

  • Employment law for employers
  • Employment law for employees

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