Dealing with difficult times – FAQs

The effect of the coronavirus pandemic has already been massive.  The media has been full of stories about the difficulties being faced by certain industries, for example airlines and hospitality, and although some industries are being hit harder than others, the effects are being felt across all sectors.  Probably the only businesses who stand to gain are insolvency practitioners!

We have been inundated with calls from clients on how they can try to protect their businesses from this completely unexpected and often unprecedented downturn in their incomes.  For most businesses, staff costs are their biggest overhead, so it is unfortunate but inevitable that this is an area where employers will look to make savings.

We set out below some of the questions which we have been asked and have tried to answer those in generic terms.  Clearly, each situation is different, and employers really need to take advice on their specific situation – do get in touch if we can help.

If the Government tells businesses to close and their employees are not able to work from home, for example in hospitality or retail, is the business still liable to pay their employees?

In short, yes.  The Government has not yet told any businesses to close, but that might well come.  If they did, then it would depend on the reason and length of the closure. If it is a long closure, then it may be a redundancy situation. The employer would be responsible for the payments owing to the employee. The Government has talked about help for employers, but the details of that have not yet been provided.

Can a business simply require its employees to take an unpaid holiday until the crisis is over?

Employees have a right to be paid, and, unless there is a specific provision in the contract regarding laying people off (which is relatively unusual), then an employer cannot force employees to take a period of unpaid leave.  However, in the current unusual and extreme circumstances it may well be that employees would agree to take a period of unpaid leave, as the alternative may be redundancies or the total failure of the business.  We all hope that the current pandemic will be relatively short lived, so many employees may well feel that a period of unpaid leave is the lesser of the evils.

Can a business simply require its employees to take a pay cut?

An employee is entitled to be paid in accordance with the terms of their contract of employment.  For some people that pay will vary, such as where there are commission payments, in which case their pay may well reduce anyway as the volume of business reduces.  However, for those on fixed wages, they have the right to be paid irrespective of the employer’s difficulties.  However, as per our answer above, employees may well agree to take a reduction in pay in exchange for a reduction in hours, eg for a 5 day a week worker, you could propose that they go to 3 days a week and take a 40% pay cut.  Again, in the current circumstances, employees may well agree to this.  If they do, then the change should be confirmed in writing, and should also be kept under review.  In our experience (and we had similar issues when the recession hit in 2008), employees will accept sensible reductions, provided they are for a reasonable time.  Clearly no one knows how long the crisis will continue, but possibly an initial period of 3 months, with regular reviews, might be sensible.

If the Government says businesses must close and businesses cannot afford to keep staff on, what happens regarding redundancy and the normal need for consultation?

This is a redundancy situation, and the normal rules about selecting people and consulting with individuals will apply.  If employers do not follow that procedure, then, for employees who qualify by having 2 years’ service, they risk claims of unfair dismissal.  We would hope that Employment Tribunals hearing the cases would look sympathetically on employers in these exceptional circumstances, but there can of course be no guarantee of that.

In addition to individuals’ rights, collective consultation rights will apply if the business is proposing to dismiss 20 or more people within a 90 day period. If that is the case, employers should follow a collective consultation process and file an HR1 form. We can advise in more detail on the requirements – please get in touch if you need assistance with this.

We know that this is a very worrying time for businesses, and we are here to try to help guide our clients through this difficult time.  We are also aware that the situation is changing on an almost hour by hour basis, so do always check the up to date position.