Coronavirus and cashflow: the difficult decisions about staffing during a crisis

Earlier this week, the government advised the population to socially distance themselves from others.

We were told not to go to clubs, pubs, cinemas and restaurants and limit our shopping to obtaining necessities (not that many people seem to have heeded that advice if the empty shelves in my local Co Op are anything to go by).

These steps may well be necessary to reduce the spread of the virus but they are already putting a severe strain on businesses – particularly those that rely on foot fall. And we may have weeks of this.

If you need to save costs in your business quickly and want to secure the long term future of your business, you might be looking at difficult decisions about what you can do about your staff costs.

Lay off

Laying off staff is obviously something no business wants to do but in this unprecedented situation, it might be the only option of ensuring your staff have jobs with you in the long term.

Essentially it means that you provide staff with no work and no pay for a while, but still retain them as employees. It’s a temporary solution to the problem of no or less work and offers the opportunity to retain your employees for when things improve.

The starting point is to look to see if your contracts contain an express lay off clause. These are relatively rare outside of the manufacturing sector but you do sometimes see them in the professional sector too.

If you have a contractual lay off clause and there’s no work your staff can do, you do have the option to lay them off. You’ll need to write to them to explain why you need to lay them off, how long you anticipate it lasting (there’s no maximum period and the concept of ‘reasonableness’ don’t apply here) , how much they will be paid (not much in most cases) and when they can apply for a statutory redundancy payment.

If you’ve laid off staff before without an express contractual clause, you might be able to rely on an implied right to do so again. We recommend you take advice before relying on this.

Short time working

This is another option and it means providing employees with less work and less pay. You’ll need an express term in the contract to rely on this or an implied right to do so.

No contractual lay off clause?

If you don’t have an express or implied right to lay someone off or reduce their hours, if you go ahead anyway without their agreement, you will be at risk of facing a number of claims:

• Damages for breach of contract
• Unlawful deduction from wages
• Constructive unfair dismissal and redundancy pay (they’ll need to resign first and have at least two years’ service)

The potentially greater risk is that employees continue to work under protest. If they don't accept the breach, they can bring an unlawful deduction of wages claim later on.

Other approaches

Unless the government steps in quickly and provides an emergency response to help businesses continue to trade through this period, you’re going to need to consider other ways to help your cash flow.

Many businesses are asking their staff to volunteer or agree to reducing their hours (and pay) on a temporary basis. Any agreement needs to be confirmed in writing. If staff won’t agree, and you’re asking 20 or more staff to change their terms and conditions of employment then you need to go through a period of collective consultation. If you recognise a union, it is important that you talk to them first – they may be prepared to take a pragmatic approach. If you don’t recognise a union and don’t have employee representatives, then it will take a while to organise this – so if time is critical, you’ll need to consider other options – including redundancies.

Other alternatives include asking staff to take paid leave - employers can usually insist that staff take holiday at particular times by giving them notice. The period of notice given has to be twice as long as the holiday being taken. For example, if you want someone to take two weeks holiday, you need to give them four weeks’ notice, unless your contract allows for a shorter period, or the employee agrees to take holiday with little or no notice.

Staff may also agree to accept unpaid leave as an alternative to redundancy.

For many redundancy is the last resort and if you decide that you have to go down this route, you may want to consider whether there are any agency workers, bank staff or contractors within your business whose contracts which could be terminated. If you can’t make it work, you will need to start consultations for redundancy. If the number of redundancies is 20 or more within 90 days, you’ll need to collectively consult first and we recommend you take legal advice for this.

Need more help?

We're doing our best to keep you up to date about Coronavirus. We've published these articles to help you:

• New advice on self isolation
• What can you tell staff if someone is self isolating?
• SSP available for workers caring for someone self isolating
• Government will reimburse SSP costs for small employers
• SSP payable from day one
• Your top 10 HR questions answered (some of these are out of date)

If you need additional information, please contact one of our award winning employment team.