COVID-19 HITS STAFFING COSTS How to Reduce your Liability to Cope with Corona
Over the previous few days, the commercial impact of COVID-19 has dawned on employers resulting in a multitude of calls and emails to NucleusHR about staffing throughout this unsettling period.
Many small employers appear to be nervous and whilst some are struggling to cover the customer demand throughout times of high absence, most are concerned about how to temporarily reduce their staffing costs whilst they cope with the downturn.
So, how do we do this? As Employers we need to know how to flex our workforce so that we can minimise the short-term impact of COVID-19. Let’s share some of the most frequently asked questions that NucleusHR has received over the last few days.
Can I reduce my salary costs?
This has been the most frequently asked question over the previous week. Businesses are preparing themselves for the worst-case scenario, and whilst their business may not yet have endured any financial impact, they foresee this happening throughout the course of the pandemic.
So, in short, the answer is, yes.
Firstly, we would ask you to consider whether you need to make permanent or temporary savings. Most employers are forecasting that this period of uncertainty is likely to last for approximately 3-6 months. In those circumstances, nearly all employers are wanting to try and retain their teams ready for when normal service is resumed. In these situations, we are looking at a temporary lay-off or short time working.
What is the difference between a temporary lay-off and short-time working?
A lay-off is if you decide that your employees are not required to come into work for at least one working day.
Short-time working is when you decide that your employees are not required to work their normal
hours each day but are requiring them to work their normal days.
Can all employers do this?
In order to activate a temporary lay-off period, without pay, you will need to have reserved the contractual right within your Contract of Employment or have a activated a lay-off period in the past (i.e. have set a precedent).
If you do not have either of those situations, you will need to rely on the good will of your team to agree to a temporary lay-off in order to avoid any permanent staffing cuts (i.e. a redundancy).
You can require employees not to attend work, however, without the above, it would typically attract
full pay, therefore, defeats the object in most cases of Corona.
How long can I use a “lay-off” for?
There is no time limit for how long you can apply a lay-off or short-time working for your employees.
You should however be mindful that employees have the right to apply for redundancy and claim redundancy pay if it has been four weeks in a row, or six weeks in a 13 week period.
We have been encouraging employers to keep a close eye on the time period used when using short-time working or temporary lay-offs, this will avoid the costs associated with redundancy, notice pay and of course retain the talent for future months.
So, I don’t have to pay staff that are laid off?
Employees would be entitled to guaranteed pay during a lay-off. The guaranteed payment is £29 per day (or the normal daily rate if less than £29 per day) for up to five days in any three-month period – so a maximum of £145.
Thereafter any lay-off is unpaid, providing that your contract and/or precedent provides for such provisions.
Employees that have worked any day (short time working) would not be entitled to guaranteed pay for that day, simply their proportionate rate of pay.
Are there are times that employees would not be eligible for the Guaranteed Pay?
To receive guaranteed pay, employees must meet the following criteria:
• have been employed continuously for one month (includes part-time workers)
• have reasonably been available for work
• not refuse any reasonable alternative work (including work not in their contract)
• not have been laid off because of industrial action
What happens if I cannot open my business until after the pandemic? Can I make permanent staffing reductions?
Yes, in these circumstances, if a temporary lay-off isn’t practical then a more permanent approach to salary cutting may be necessary.
What is a redundancy?
A redundancy is when you can dismiss an employee because you no longer need anyone to do their job. Whether the business is changing what it does, how it does it, changing location or in this situation, there has been an economic downturn and a business can no longer afford to support that role.
You must remember that redundancy should not be used as a vehicle to dismiss an employee who is simply not performing. For a redundancy you must demonstrate that the employee’s position will no longer exist.
Can I tell my employee that I just can’t afford them anymore?
Not without the risk of an unfair dismissal claim being successful. There are strict and often viewed as complex requirements for an employer to comply with when making redundancies. It is always best to take advice from your HR support team.
Is there a minimum length of service required for redundancy?
To be entitled to redundancy pay an employee will need to have accrued two years’ service. This is similar to requiring two years’ service in order to claim unfair dismissal.
What do I need to consider when making redundancies?
When considering redundancies, you will need to think about a multitude of matters such as:
• Possible alternatives to redundancies (existing staff to work flexibly, short time working, possible lay-offs, laying off self-employed contractors, restricting recruitment, reducing overtime etc.)
• There are strict consultation and possible representation requirements depending on how many employees are likely to be made redundant, specific advice should be sought on your duty to consult, failure to consult could render any subsequent dismissal unfair resulting in costly financial penalties.
• Consider requesting and accepting volunteers for redundancies.
• It is worth remembering that as employees you aren’t just liable for the cost of the redundancy payment, but also the contractual notice pay.
• Remember employees do retain the right to time off to look for alternative work.
Redundancies are a complex area of the law and we encourage you to take separate advice prior to commencing any redundancy consultation.
Can I ask my employees to take a salary cut throughout the period?
In essence, yes, you can ask. Bear in mind that you cannot unilaterally reduce an employee’s salary without their consent.
Throughout the economic downturn in 2008, a client of NucleusHR did approach all of their employees and asked them to take a 20% pay reduction in order to safeguard jobs throughout the recession. All employees voted to do this in return for a day off each week, a period which lasted for 18 months.
It may surprise you what employees are prepared to do in order to continue working for you.
Are employees obliged to agree to my suggestions to safeguard jobs?
No, in reality they aren’t. There are lots of creative ideas when looking to make salary savings, our advice is to work with your employees and HR support teams to try and agree a way forward.
If you need any advice, help or support throughout this uncertain time, please do not hesitate to contact Toni on 07960 418494 or email email@example.com