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COVID-19 Your workforce: pay and costs - practical ideas our clients are exploring

24 March 2020. Published by Patrick Brodie, Partner and Kelly Thomson, Legal Director

These are extraordinary times that place extraordinary pressures on all of us, including dealing with your workforce. We set out below some ideas that we are hearing about from our clients and some areas you may wish to think about in terms of your employee costs.

  • Balancing and moderating your fixed wage bill -  In order to maintain financial health for the future while dealing with the here and now, various factors come into play: predicted revenue and cash collection; retention of business critical and essential skills and experience, measured (and considered) in the immediate and, as things improve, the longer term.
  • Paying employees in various circumstances brought about by the Government's guidance on self-isolation and isolation - So for example, what is the right to receive SSP or enhanced contractual sick pay or normal pay in various situations?  These questions about pay include the following situations: (i)  a person self-isolating in an approved manner consistent with Government guidance; (ii) there is no work available for the worker where she or he is otherwise able to work; (iii) a person is isolating because that person lives with a vulnerable individual within a Government announced high risk group – there are variations to this question where a person is able to work or, alternatively, not able to work; (iv) a person chooses not to attend work – again, there is a variation if that concern flows from clinically recognised stress or anxiety. 
  • Reducing costs – back to the wage bill. Companies are looking at:
    • Varying duties, working hours and pay.  Some are looking at moving employees to different tasks or roles.  Some points to explore: 
      • Any express contractual flexibility to change hours, pay and duties;
      • Absent an effective contractual right, how changes can then be made.  This in turn feeds into:
        • Communication;
        • Consultation on changes: individual and, if the number of employees impacted is significant, collective redundancy consultation – don't forget a dismissal and re-engagement (or a constructive dismissal) counts for collective redundancy consultation.  
        • Ideally, changes will be made by agreement, having illustrated the need for change.
        • These variations are seen as an alternative to redundancy.  Employees may be willing to reduce pay to avoid redundancy.
    • Temporary layoffs - if employment contracts allow for that; if not, by agreement.
    • Unpaid sabbaticals
    • Partnering with other organisations whose workforce demands have increased, looking to agree temporary sharing/seconding of relevant resource.
    • Redundancy if reductions cannot be achieved through other means.  We will be mindful that this brings in individual consultation. And if the numbers exceed the collective redundancy trigger (20 or more employees at risk of redundancy), collective redundancy. Companies will comply with s188 collective consultation with appropriate representatives. HR1s must be filed. 
  • Accrual of holidays during this time? Companies are turning their minds to planning how they might carry over, including extending the time for any subsequent holiday year carry over.  Equally, albeit the approach does not reduce employee costs, other than potentially on termination, exploring to what extent employees might be asked to take holiday now, such that they're more available for work later in the year or have reduced the amount of taken holiday, which if there's a significant down turn leading to dismissals would, if not taken, otherwise increase the amount of a payment in lieu of accrued and outstanding holiday.  To support this, some employers are revisiting the right to require employees to take statutory holiday by giving notice directing employees to take holiday on particular dates.

When planning workforce changes (especially if they may, otherwise, lead to job losses) you will be mindful of the announcement by the Governor of the Bank of England, that companies should consider support available from the Government or the Bank.  The Government is encouraging and supporting businesses in retaining staff. That situation is evolving. The Government has announced the Furloughed Worker Scheme.  As you might imagine, because the rules are changing so quickly, the guidance around the scheme is limited and vague – much of the detail remains to be worked through; this is clear from the language and words used in the announcement, including here. Broadly, the Government has offered to pay 80% of the wages paid to a furloughed worker (being a worker on temporary leave because of the economic conditions affecting the specific employer or the economy as a whole), up to a cap of £2,500 per month. HMRC are said to be working urgently to set up a system for reimbursement. What falls to qualify as recoverable wages under the scheme remains to be identified, noting that the announcement, also, refers to 'salary', which as we know is a narrower term.

See here for more details

If you would like some advice on this topic, please contact any member of our team: 

Patrick Brodie

Kelly Thomson

Rachel Lord

Charlotte Reid

Joanna Holford

Victoria Othen