Unless you have been living on the moon for the last three months you will know that COVID-19 has forced businesses all over the UK to shut their doors and cease trading for prolonged periods of time. However, as some semblance of normality looms on the horizon, finally businesses can start planning for trading again and many an employer is seeking to transition their staff back to work. However, ensuring health and safety measures are implemented within the workplace is not the only issue that employers need to factor into their new working business models…

With the moratorium in trading, businesses have haemorrhaged profits and working capital in an unprecedented fashion. The consequences have been dire for many businesses, many of which have had to reshape, reinvent, and rethink their business models. Not all businesses will have the luxury (of the likes of McDonald’s and Primark) of queueing customers winding their way down the high street as they wait to engage in capitalism’s finest hour, Post Covid.

Although the government has offered different incentive schemes and ‘business survival’ packages to SMESs in a bid to encourage them to retain their staff once open, the reality is many businesses will find themselves facing the dilemma and the difficult decision-making process, of choosing whether to make some of their staff redundant.

But is this process going to be as straightforward as it seems?

Obviously not…

The law surrounding redundancy is complex as is the procedure for Redundancy (especially if a business has availed itself of the government scheme for furloughing staff).

Redundancy is a conundrum for most small business owners; and redundancy is often viewed by the courts as the option of last resort (we shall be discussing the full procedure on how to comply with the law regarding Redundancy- this  will be dealt with more comprehensively in the next article within our series on employment law for small businesses).

So, in the meantime, what are the options available to small business employers?

• Making savings in other areas

As obvious as this option may seem– it is surprising to note how many employers often go straight for the jugular of axing staff rather than looking at making cuts in other ways. Employers should take care and should have due regard in considering how budgets can be streamlined and cost savings  can be made in other areas of the business’ operations – Such as reviewing contract terms and conditions and renegotiating the same with  parties in their supply chain. Most supply chains operators would rather negotiate terms than lose their client. Also reviewing in-house expenses- such as commercial lease rents, reimbursement of senior staff expenses, cutting back on hospitality costs and minimising product waste –   with the aim of reducing costs this way is a favoured option by many savvy SMEs at present.

• Flexible furlough

This is a relatively recent solution being mooted in the commercial world and seemingly endorsed by the government for now… Essentially, employers will be able to bring back previously furloughed employees for a varied amount of time (i.e. part time or a  needs basis) and on any pattern of hours work (and claim a grant for the hours not worked. The government has published further guidance on the Government Job Retention Scheme (GJRS), including more information about the new flexible furlough rules. The government guidance was published late on the evening of Friday 12 June 2020.

From 1 July 2020, businesses will be able to bring back furloughed employees to work a flexible pattern, while still claiming funds back for the hours that they do not work. However, only employees that have successfully claimed a previous grant will be eligible for more grants under the scheme.

Existing government guidelines sees employers contributing towards the cost of furloughed employees’ pay from 1 August 2020.

This means that if an employee who usually works five days a week is now only required to work two days a week, an employer can furlough them for the remaining three days. Employers can later change the amount of days an employee is required to work and the amount of days they are furloughed if business picks up.

• Change of terms of conditions

Essentially this involves changing the terms and condition of the contract of employment. Once it is decided which employees will be returning from furlough, an employer may wish to vary the terms and conditions in its employment contracts in order to retain as much staff as possible and/or adapt to the new commercial needs of the business. Essentially one further step away from having to make employees redundant, this variation can be effected in a number of ways i.e. through mutual agreement, collective agreement, using the variation clauses allowed for in the contract, unilateral imposition of new terms, or through dismissal and re-engagement on new terms..

• Redeployment to other departments

Simply put, this option involves an employer redefining the new role of the employee and/or moving them to work in a completely different department or section of the business altogether.  An employer ought to consider appointing  an employee,  who may be at risk of redundancy, to a position which may be wholly different in terms of the employee’s  current post (subject to the employee agreeing to this move and the necessary skills training being provided). Often employees faced with the prospect of redundancy have to gain new skills and aptitudes for re-employment in the job market. So, if they can be soaked up internally, go for it! Redeployment opportunities tend to be focused within the employees’ current department or faculty; however, if there are no such opportunities available within the same department, an employer may decide to move the employee to a different department.

• Restricting Overtime

The most common method is the good old-fashioned reduction of overtime. It is one of the most effective methods used by SMEs in the retail and hospitality industry – as means to reducing expenditure as it herds employees back to their contracted hours. Especially in the retail and hospitality industry – where minimum wage reigns supreme and workers heavily rely on the good old chronic diet of ‘overtime as their model for meeting living costs. In these industries, employers often find it difficult to reduce overtime and can often be found hiding in their office in a bid to avoid their employees repetitively bombarding them with questions about where their extra hours have disappeared to.

However, if employers approach this option – with a bit a planning and engage their employees- by elucidating on the underlying reasons; namely, that the ‘overtime culture’ (where extra hours are considered the norm) is being put on hold and that overtime hours are now considered on par with the  level of luxury of owning the latest designer handbag, then only then are the trepid employees likely to buy in and support the cause until there is a light at the end of the tunnel. Employers are often surprised by how loyal staff can be when engaged via consultation. The final decision will always vest in the employers but do not underestimate the power of staff engagement.

• Job Shares

Job sharing is a rare breed of flexible working that is not native to most industries. Two heads are better than one, right? Yes, especially if two heads are cheaper than one. Employers should not shy away from consulting with their employees on the issue of job sharing, this allows employees to engage and reach an agreement where a full-time job could be split between two individuals. This approach has worked well in the service-based industries. Employers are often surprised to find that employees are keen to job share. As for the employer, job sharing means having double the manpower, double the enthusiasm and double the financial savings.

• ‘Last in first out’ policy

Controversial yes, but still legally do-able. If push comes to shove (excuse the pun) employers can elect employees with the shortest length of service (which for employers would be anyone with less than two years continuous service) for redundancy, some employers choose to make those who have been employed for less than 2 years redundant. This policy is effective in sieving out the newest additions to the team that still have a lot to learn and may require more training, and leaving behind the old but gold members of staff who have learn the ins and outs of their employment and who employers can be confident will carry out the tasks that they will by now be very familiar with to the same high standard that they have always been working to.

• Voluntary Redundancy

When presented with the knowledge that there is an option for employees to voluntarily be made redundant, the first thought that employers often have is; ‘there are employees that nominate themselves to be redundant? Balderdash!’ However, employers may be surprised to learn; some employees may be willing to take redundancy packages if the offer made by the employer is appealing, and that the concept of the ‘Golden Goodbye’ is the underpinning principle behind Voluntary Redundancy. In a nutshell, the parties negotiate an exit strategy with mutually acceptable terms (preferably get your HR department and your solicitors to handle this if you can); and once signed and the employee goes on their merry way into the horizon of new opportunities; of course they are  suitably gagged by the company’s robustly drafted agreement, but happy nonetheless with their ex-gratia payments. These ‘without prejudice discussions’ enables the employer to retain control of the process, as well as the final decisions surrounding the removal of members of staff.

• Mandatory redundancy…

This, the almighty sword of Damocles…. is often the last option that employers ought to be considering (in an ideal world). It can often be rather complicated procedurally for SMEs, as the consultation process for redundancy often has to be adapted to small business needs. Employees have several rights, and employers have a number of obligations when the redundancy process is triggered. And this process can go so wrong so quickly if an employee senses that they are being ‘pushed out’ for reasons other than the economic factors of the business.

Employers must ensure that the there is a clear written Redundancy Policy in place that outlines the process and the business’s principles underpinning the making of redundancies.  The process must be fair, must clearly set out the reasons why a particular cohort of employees have been chosen using evidence and facts. It is further complicated by the fact that certain characteristics are protected by the laws on discrimination. It is also important that employers are able to show that they have had due regard and considered other options prior to electing mandatory redundancy (see our discussions on the alternative options outlined above).

Please see our upcoming article for a comprehensive discursion on the legal procedure for redundancies.

If you and your small business needs in-depth support and guidance on the topics highlighted above please note that HCL Legal Team can assist- Our legal team can proffer initial strategy advice- by conducting risk analysis and risk assessments for your business; drafting the relevant letters to employees as well as negotiating new terms; and project managing the the consultation process for redundancies.