June 12, 2020

As the COVID-19 pandemic continues to wreak havoc on the global economy, business leaders across the UK are being forced to make tough financial decisions to ensure their operations stay afloat.

While some companies are fortunate enough to continue operating via remote working models, others in industries such as hospitality and the arts are facing significant financial disruption as their usual activities have come to a standstill.

If your business falls into the latter camp, you may be very busy drawing up plans for how to restart operations as soon as you are able.

For many, this will involve intensive financial planning and budget cuts, including staff redundancies.

Although the UK government has been relatively generous in helping businesses to stay afloat by implementing policies such as the employee furlough scheme, such measures cannot guarantee that all staff are kept on.

While redundancies may seem like the most obvious solution for financial issues, most businesses will be keen to retain as many staff members as possible in order to preserve specialist skills.

You are also likely to feel a sense of duty towards your staff, of course, as many of them will be relying on their income to stay afloat during these tough times.

Fortunately for many sectors, the government is starting to lift stringent lockdown measures, opening up opportunities to remobilise parts of the economy and save livelihoods.

While the future may look uncertain, there is light at the end of the tunnel, and there are plenty of creative measures you can start implementing now to avoid job losses as financial aid from the state starts to dissipate.

To help you out, we’ve listed a few here in our handy guide.

Paid and unpaid leave

Encouraging employees to stop working for a short period of time, either unpaid or on a reduced salary, could help you out of a financial hole.

Their consent will be required, of course, unless their contract states that they can be placed on unpaid leave.

Another good option, particularly as the economy looks set to start moving again, is to request that employees use up their annual holiday allowance now in order to guarantee their availability later.

This will ensure that all hands are on deck when business operations get going again.

Temporary layoffs

If your employees’ employment contracts state that you are able to temporarily lay them off when there is little work available, this may be a sensible option for saving money and ensuring that they can return to work at a later date.

If employee contracts state otherwise, however, any enforced layoffs could represent a breach of contract and encourage staff members to file claims against you.

Deferred salaries

If you are keen for certain employees to keep working but are looking for ways to save money in the short term, you may wish to defer part of their salary.

This option will require employee consent, of course, and you will need to ensure that they continue to be paid at least the National Minimum Wage.

This is a sensible option for many businesses facing temporary falls in revenue, particularly as employees are not likely to be spending much throughout the lockdown period.

Deferred parts of their salary can then be paid once the business starts to pick up.

Short-time working

Short-time working is similar to layoffs as it can effectively avoid redundancies by temporarily reducing pay.

Unlike layoffs, however, short-time working is a solution that allows employees to keep working, albeit on reduced hours.

In this situation, your employees should be guaranteed a certain amount of work in return for corresponding pay, a solution they are likely to prefer over redundancy.

Of course, you should still adhere strictly to legal principles if you are considering short-time working solutions. This means that short-time working options should be stated as possibilities on your employees’ contracts.

Even in cases where you have the right to reduce employees’ hours, they are still entitled to claim statutory redundancy pay if they have been working for your company for over two years and have been placed on short-time hours for four or more weeks in a row.

That is, of course, unless you can demonstrate that they will be required for full employment in the near future.

Furthermore, if an employee hands in a resignation notice whilst they are on short-time hours, they may still be entitled to their usual full-time salary throughout the notice period.

Pay reductions and withdrawal of benefits

Reducing pay and benefits can be a very difficult policy to adopt.

For many employers, however, there are few alternative options other than widespread redundancies.

Fixed pay rates are required for most employment contracts, so businesses that choose to reduce pay may face legal challenges.

If you plan on taking this route, then, you must inform employees well in advance of implementing the changes and explain in full why you have decided to do so.

Ideally, you should emphasise that the measures are temporary and explain their benefits.

Most employees will feel a little more warmly to pay reductions if they know that they are necessary to prevent the business from going under or to save the jobs of their colleagues.

You may also wish to consider temporarily halting costly employee perks such as away days and office parties unless, of course, these are stipulated in staff contracts.Let

Neathouse Partners help you out

If you need help handling employment and HR issues throughout the COVID-19 crisis and beyond, get in touch with Neathouse Partners today!

Like what you read?

Join 5,494 business owners and HR practitioners keeping 'in the know' with the latest HR & Employment Law developments.

  • Sent every Friday
  • Features the latest HR news 
  • Usually under 5-minutes read time
  • Free, forever
  • <0.42% unsubscribe

About the author 

James Rowland

James is the Commercial Director at Neathouse Partners and regularly writes articles surrounding issues in HR & Employment Law. Outside of the office, James is a keen Cricketer, playing in the Cheshire League for Nantwich CC. He also loves going to watch his football team, Crewe Alexandra. Feel free to connect with James on LinkedIn.

Comments