To what extent can employers implement the following cost-reduction strategies as a result of COVID-19, and what are the primary limitations on each?
The Government Coronavirus Job Retention Scheme has enabled employers to place employees on furlough and claim up to 80% of their salary up to £2,500 per month as a grant. When the amount that can be claimed under the Scheme is reduced from August onwards, then ultimately removed on 31 October 2020, employers may consider extending furlough on a self-funded basis, which is possible provided employees agree to being furloughed. If they will be on reduced pay, you will need a new furlough agreement which they may be willing to agree to as an alternative to redundancy.
If the employer has a contractual right to lay off without pay, this could be relied on, but you should consult with employees and give them reasonable notice of lay off.
- Salary reductions.
Employers can reduce pay with the employee’s agreement which should be evidenced in writing. Alternatively, if you recognise a trade union for collective bargaining purposes, you may be able to agree to the change with the union. If the employer has already formulated a proposal to dismiss as redundant, or to force change by dismissing and re-engaging, any employees who do not agree to a salary reduction, then collective consultation obligations are arguably triggered.
- Redundancy, including facility closure.
There must be a genuine redundancy situation, i.e. a reduction or cessation in the requirement for employees to carry out work of a particular kind, or a need to shut down all or part of the business in which the employee works. Alternatives to compulsory redundancy should be explored first (including seeking volunteers for redundancy, seeking agreement to staff working on reduced hours and/or reduced salaries on a temporary basis).
If an employer is proposing to dismiss 20 or more employees at one establishment within a 90 day period, the collective consultation obligations will be triggered: consultation with employee representatives must commence at least 30 days (for between 20 and 99 dismissals) or 45 days (for 100 or more dismissals) before the first dismissal is proposed to take effect. Whether or not collective consultation is required, employers will also need to engage in consultation on an individual basis with employees at risk of redundancy.