Last reviewed 9 June 2020
In this article, Stuart Chamberlain, Croner-i author and employment law consultant, outlines alternatives to redundancy for employers such as the Government's Job Retention Scheme (“Furlough”), while managing a pandemic such as the coronavirus (Covid-19).
On 23 March 2020, the Government announced a series of measures in response to the ongoing medical threat from Covid-19, including the closure of most places of work. Where possible, staff should work from home during the emergency. This is intended to be temporary, until the coronavirus threat has receded.
In such a situation, employers will obviously look to reduce costs, most likely through redundancies. The problem with redundancy is that it is final and potentially deprives the employer of much-needed skills and talent that may be needed once the coronavirus crisis is over.
This article looks, therefore, at some options for the employer to consider as alternatives to redundancy, including the recently announced Government Job Retention Scheme. The options considered below are not intended to be exhaustive.
1. The Government's Job Retention (“Furlough”) Scheme
The UK Government has announced sweeping fiscal measures to support businesses and employees during the Covid-19 pandemic. Employers who are experiencing a business downturn are encouraged to consider these measures rather than making redundancies. The Coronavirus Job Retention Scheme (CIRS or “the Scheme”) will enable UK employers to access financial support to continue paying part of the salary of those employees who would otherwise have been laid off during the Covid-19 crisis — this means made redundant or provided with no work and no pay.
2. Lay-offs and short-time working
Where an employer cannot provide work to an employee, they may, as a temporary measure (where permitted by the contract of employment) lay off the employee or put them on short-time working.
Lay-off is where an employer no longer requires an employee to attend work for a temporary period. The employee will not be paid but may be entitled to a statutory Guarantee Payment — presently the maximum is £29 a day for 5 days in any three-month period — so a maximum of £145 with part-time entitlement being pro-rata. From 6 April 2020, the amount increases from £29 to £30.
The major problem with laying off staff is that the employer must have a contractual right to do it or they could face claims of constructive unfair dismissal and unauthorised deduction of wages at the employment tribunal.
A further problem is that employees who are laid off will have 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.
Short-time working is a similar concept to laying-off. The employer unilaterally reduces an employee's hours and pay on a temporary basis. As with lay-offs, there must be a contractual right for the employer to make the change, and, again, the employee retains the right to claim a redundancy payment once certain timescales have been reached. The employee on short-time working may also be entitled to a statutory Guarantee Payment — see above.
If you are considering either of these options, you should first check whether the Government’s Coronavirus Job Retention (CJR) Scheme (also see above) can provide any financial assistance before you commit to laying off staff.
3. Reduction of hours and pay by agreement
You could introduce a shorter working week (and, therefore, a reduction in pay) as a temporary measure. This will require consultation with the workforce and their written consent to the temporary changes.
You should make it clear during the consultation that the alternative will be redundancy. A temporary reduction in hours and pay is more likely to be accepted by your employees as an alternative to the finality of redundancy.
You are likely to face claims at the employment tribunal if you introduce such a measure unilaterally.
Another option under this heading would be to reduce or stop overtime.
4. Change to recruitment policy
There are several actions that you could take, including
withdraw job offers and/or defer new starters — but remember unilaterally withdrawing a job offer that has been accepted will be a breach of contract and that deferring a new recruit’s start date will require their consent if the offer has already been accepted. However, the sums involved in payment for breach are not likely to be substantial.
a recruitment freeze
reduce or stop the use of temporary staff.
You could consider redeploying those employees who have seen a recent downturn of their work. They could be redeployed to areas of the business where there is a maintained or increased workload. They may need a short period of retraining to support the redeployment.
There could also be a possibility of staff being moved to another employer on a temporary basis. The new employer would meet the salary costs.
6. Sabbaticals and unpaid leave
Some employees may welcome the opportunity for unpaid time off. You may need to pay a “sweetener” to encourage this option,
Consider the Government’s CJRS proposals and your eligibility carefully. If none of these options work, then you may have to move to redundancy — see Top 10 tips for Managing Redundancy and the Redundancy Toolkit on the Croner-i website.