With Michael Hibbs, Partner – Employment
30 October 2020, 9:30AM - 10:15AM
For many businesses, its people are its most precious asset.
But as many companies face serious cash flow issues following Covid disruption, how do you ensure you keep your business afloat in the short to medium term without losing the skills and staff you need for long-term recovery?
When redundancy isn’t an option, what else can be done to save on overheads?
In this webinar, we focus on some of the alternatives to redundancies, including:
This was a live event with the opportunity for questions and answers on the day. If you wish to put your questions forward in advance, please email these to events@shma.co.uk
Who should attend
HR directors and professionals, business owners and senior managers with responsibility for people management
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Webinar transcript
(Please note this is auto-generated and un-edited)
I'm Mike Hibbs, partner in the employment team here at Shakespeare Martineau. Welcome to today's webinar on Waiting for the Storm to Pass Alternatives to Redundancy.
0:32
Before we start, just a few points on how this online session is going to work, on your screen, at the bottom in the toolbar. You'll see the Q&A icon, please use that to ask your questions. I'll try and get to answer all of those during our session, but if I'm not able to do it within the time, then I'll respond to you later. And you'll also see the chat icon. Please use that to engage with other attendees. And otherwise, I think those are all the details you need.
1:07
We are at this time, I think, at a tipping point, or at least we will be at the end of October, because when the pandemic struck, the Chancellor of the Exchequer Ritchie soon, I outlined measures to keep people in employment. And the coronavirus scheme will come to an end, at the end of next month. And the aim was to keep people in employment throughout that period and for as long as possible. And it was launched at a time when many workplace was we're going into lockdown.
1:46
The concept of furlough was introduced and employers were able to claim up to 80% of their employee's salary and claim it back through HMRC with a cap of £2500 per calendar month per employee.
2:04
Inevitably, there were problems with the regulations and how this was going to be organized, but it was eventually confirmed that employers could keep their employees on furlough, even when they were on notice of redundancy provided that the employer topped up that pay during notice period to full pay.
2:27
As a result, many employers have now concluded their consultation with employees and to have served notice to terminate their employment by reason of redundancy as close to the 31st of October as they possibly can manage.
2:45
The reason for that is obvious. There are jobs which will sadly not return and there are other jobs which will disappear for a while during the current crisis, but may return in the future.
3:00
For most employers, that's a cost burden. They can't bear.
3:06
However, for most businesses, apart from the few who've increase profit and turnover because of that particular sector, such as food or medical supplies, have simply a reduced need because maybe of a delay pipeline because of reduction of orders or because the cost of the pandemic to their business has been so great that they need to retrench.
3:32
The reaction of many businesses in those circumstances is to look at their greatest cost, and that's usually the payroll or the workforce, and, therefore, they reach for they weapon of redundancies in those circumstances.
3:46
However, that is and can be a very blunt instrument indeed. And it can be cause very long term harm to a business.
3:56
Staff are well trained and they have exactly the skills that the business will need when the current crisis is over and those are going to be lost on a date. In addition, the business has the cost of redundancy as well.
4:13
Last week, the CBI, to UC, and Aik has got together and made a joint statement to all businesses encouraging them not to make redundancies.
4:25
But if they needed to, to do so openly thoroughly, genuinely fairly and with respect.
4:35
Many of you will know that from the start of the pandemic I've said that employees and people in general will remember how businesses have behaved during this crisis.
4:48
This is not just four weeks or four months but for years into the new abnormal as our CEO would like to call it.
4:57
one of the major factors in the selection of these employees for where they're going to work in the future will be those employers who behaved well towards their employees.
5:11
So there must be alternatives to redundancy, and of course, there are. And I haven't got time to go into a enormous detail on each one, but I want to talk about the job support scheme. The job retention bonus, do you remember that?
5:28
Contractual alternatives to employment, short time on layoff, changing terms and conditions of employment, including part-time work.
5:39
I also want to touch on retraining.
5:42
I want to talk a little bit about restrictive covenants and the particular problem of those with part-time work.
5:48
I want to talk about flexible working and finally, I want to cover reward and retention and how to make those effective for both employer and employee.
6:00
So first, the job retention bonus. This was announced if you remember the same time as the extension of furlough, the point at which employees were able to start to do some work but also the gradual tapering off of the amount to be paid. So for next month, the furlough scheme will only pay 60% under the job retention bonus. And I should say that the Government promised us further guidance, by the end of September.
6:31
Winds that, oh, that's could be today, couldn't it? But there's nothing out so far. In fairness to the government, there's still a few hours yet, but we'll have to keep an eye out for that.
6:42
But, so long as employees remain continuously employed till the end of January 2021, there is a job retention bonus of one thousand pounds for every employee who has been on furlough at any point. Needless to say, there are some conditions. Employees must earn at least £520 per month. That's the national income, lower limit, on average, between the beginning of November and January.
7:21
It does include all those people who've come back from maternity leave after the 10th of June, when furlough Scheme closed to new entrants. And it also includes those who transferred and the transfer undertakings regulations tupi.
7:39
The claim will be possible to be made from February provided that in the period up to the first of February, the employee is not serving notice and expressly, this can be combined with the new job support scheme.
7:59
So the first thing to say about the new job support scheme is that it's not furlough, nor is it an extinction of low. But it does have 1 or 2 characteristics which are similar to the Coronavirus job retention scheme.
8:15
So it has a deadline, The time period is six months, it will run from the first of November to April the 30th and it has a cap on the government contribution Which is £697 and 92 pence a months.
8:35
That 69792 a month but the business doesn't have to have used for low to be covered by that scheme.
8:45
It works on the basis that employees will work and be paid for at least a third of their normal hours.
8:53
And then you look at the balance of there as the other two thirds and of that, half will be paid by the government, and the other third will be paid by the government and the third by the employer, leaving a third that the employee will not be paid. The result of that calculation means that employees should get at least 77% of their pay.
9:16
So very similar to the further scheme in that sense, I should add here that larger employers whose turnovers been unaffected by ... will not be able to claim.
9:30
I suspect that for those employers who are thinking that this is a good idea or maybe a good idea, then they're going to need to do some very careful number crunching to make sure that it's going to be effective for them.
9:44
It's important to bear in mind that, unlike furlough, you will not be able to cover notice pay even imparts when making redundancies. So, if at the end of the scheme, you think that you're going to be likely to have to make redundancies, then bear in mind in your calculations that you, you may well be able to cover the cost of consultation, but you won't be able to cover the cost of notice, pay, or obviously, the statutory redundancy payment.
10:13
So, undoubtedly, this scheme will help a few, but I suspect it will be a relatively small number of businesses that will find it useful.
10:23
So what about other possibilities? Well, one of the possibilities that you could consider is to have your, those who engage with you and do work for you to be contractors and not employees.
10:37
And the advantage of that, of course, is that they don't have the ability to be able to claim unfair dismissal or redundancy payment.
10:45
You have all the usual tests to see whether they are employees or not. And you would obviously have to be prepared to have quite a bit of relaxation in terms of your control over what they do. And that may be all very well with those people that you are freshly engaging, but what about conversing employees to contractors in those circumstances? You have to think, first of all, about the termination of employment. And that means that you will have to try, if you possibly can, to get consent. And that will avoid the risk of future claims if you manage to get them signed up to say a settlement agreement, or, alternatively, you could have an agreement through a cas called three forms.
11:29
But it's sometimes the case that employees will be attracted by the freedom to send a substitute, if they want to, to go and work for other employers. And maybe to work at their own time when it's convenient to them. And they might prefer that to engaging with a business where that job is at risk in one way or another.
11:53
This is not going to be an alternative to redundancy for many but it may work for a few.
12:02
At the start of the pandemic, many employers reached for the contract of employment to see whether they could lay off their staff or put them on short time working only to find that there was no clause in the contract to allow them to do so.
12:18
Generally, it's a feature of more manufacturing contracts than others, although it does appear in other contracts of employment in other sectors.
12:27
And the closest allow employers to take advantage of statutory provisions, which keep employees as employees, but allowed the employer to lay them off for periods of time without pay.
12:41
And on the proviso that there would be some work in due course or alternatively less than half a week's work. In which case that would be short time work as defined with similar provisos. The only payment that had to be made by the employer in those circumstances is a statutory guaranteed payments, and that currently is £30 a day, to a maximum of £150 over three months.
13:07
So, it's not very much at all, and the rules it provide employees with the opportunity to challenge that and seek their redundancy payment, but then the employer can serve a counter notice.
13:21
Now, I'm not going to go into all the details now. But, it can be a route to use if a large order has fallen through, but you know that at some stage soon, there either is a new order, but it's, the work is not now, or that there will be a new order, or likely to be one. and there will be some substantial work.
13:42
At that stage, you do need a clause in the contract to deal with that, and you, or alternatively, you will need to agree with the staff that that's what's going to happen.
13:55
So that neatly brings me. You'll be surprised to learn to changes to terms and conditions of employment. Now, there is a separate webinar that I recorded a few weeks ago in relation to terms and conditions of employment. And if you want to go into more detail, then I recommend that to you. But in general, changing terms and conditions of employment is not straightforward.
14:18
This is a contract and for the change to occur. It generally needs agreement, except in minimum change examples. So for larger numbers, 20 or more, when establishment collective consultation is necessary, either with the unions or with elected representatives. And if you don't have elected representatives, you would have to get them elected. But individual consultation is in any event, going to be required.
14:48
So check whether you have any flexibility Clause, and if possible, seek xpress agreement.
14:57
If that's not possible, despite all the persuasive arguments that you can raise, then ultimately, you can give notice to terminate employment and re-employed on the new terms.
15:12
Um, business reasons sound business reasons will be need to be set out and the wise employer will consider the effect on the employees in question.
15:24
It's generally a lot easier to make this work if most of the employees consent and only a few refuse to do so.
15:34
Do beware of situations where employees have transferred under tupi until the transfer of undertakings regulations because you may need an economic technical organization or reason for take changes if the changes to the contract are connected with the transfer.
15:54
And do make sure that you update the contract of employment after you've reached agreement, and those include the changes that came in in April next year, which you already should be included in your new contracts of employment, but you don't have to include in existing contracts.
16:15
I said I've mentioned retraining because for some businesses, parts of the business are expanding while other parts are contracting. It may well be worth giving some of those in the parts of the business that are declining the opportunity to retrain for work in the growing part.
16:34
Clearly, the cost and the time involved needs to be taken into account. But it may save redundancy cost and would especially apply to those employees who have obviously the right attitude for the business going forward.
16:51
There's a particular problem with restrictive covenants, and part-time employees, which needs to be mentioned.
16:59
So if you change terms and conditions of employment so that the employees who are formerly full-time become part-time, can you control what they do with the rest of their time?
17:11
The answer is, in general, is that you can't, they can work for whatever other employer they want to in their spare time, but you could try to impose a term that they shouldn't work for competitors.
17:25
And if that's very precisely defined, the employee may well agree to such a clause being entered.
17:32
But if it's a more general clause, the employee will object on the basis that you're not providing them with more hours, and they should be able to earn a living.
17:42
What you're proposing they will cite is a restraint of trade.
17:47
As always is the case in drafting of restrictive covenants. The devil is in the details, so it's really important to get those properly drafted.
17:58
Flexible working is now key to most businesses.
18:05
National surveys show that if it's one of the benefits, that most employees appreciate most.
18:12
And in the current times, the opportunity to employees to work at times which suit them and their families and their lifestyles, and he's very attractive. Even if this means less of salary because of less hours being worked.
18:27
So, consider arrangements, which, again, to help the business. The most may be, for example, you need everyone in the business on certain days, but only need a small number of people on other days.
18:41
That may suit those who can arrange their childcare for those particular working days.
18:46
Some businesses, especially those dealing with other countries, in different time zones, as customers, suppliers, or parental subsidiary companies find, it's helpful for work to be done at what's in the UK would be considered to be unsociable, or anti-social, ours. Actually nowadays, in the current circumstances, they may see some people, it might be attractive to be able to work at different hours when there are no longer doing, he says, and distractions around the house or other things that need to be done.
19:19
So it's worth thinking about that as an alternative for some and that may also avoid redundancies.
19:28
I also said that I wanted to mention retention and reward.
19:33
That's because a number of the businesses that I advise or having to close sadly parts of their business, they know they're going to be doing it at some stage. But there is going to be a period before that when they have substantial amounts of work, and they need most of the workforce to be fully engaged.
19:53
Those sorts of businesses need to recognize that.
19:57
The workers in question will need jobs when they leave.
20:02
And if they're to avoid the distraction of the lengthy job search while supposed to be working off of people leaving early, they're going to need to offer a reward to employees to stay for the duration.
20:18
Now, obviously, whatever a reward you produce can be of any shape you like, but it needs to be thought through from the employee's angle.
20:28
You may want, for example, to offer a retention bonus in a few months' time and split it, and offer a much larger bonus, right at the end.
20:39
Some businesses think that it's useful to have a repayment clause if people leave. That doesn't always seem to be very successful, or very much of an incentive to employees to stay.
20:52
Beware of the tax position two, the sums will be taxable.
20:57
However, of course, enhanced redundancy payments may not be taxable and that may be relevant, but be careful that it genuinely is an enhanced redundancy payment and not seen as a retention bonus.
21:14
On the wider point, bonuses, obviously, may not be payable in the current times, So, finding other ways to reward staff which may be appreciated, is a challenge.
21:26
Especially, for example, at the moment where, giving an extra days holiday may not be that much appreciated, because, employees may not feel they are able to enjoy it that much.
21:37
So, finding inventive roots will be appreciated by most employees, and it's worth spending some time thinking about that.
21:47
I'm not going to tell you that this has been a comprehensive list of all the alternatives to redundancy.
21:56
But hopefully, it will provide you with some ideas to help you to decide which is the appropriate route for your particular business, in order to keep the skills and the expensive training that you provided within the business if at all possible.
22:17
That's all I want to say.
22:20
But now, I'm happy to answer questions that people have gos, Uncle Merle. We have had some questions come in. So fast, one holes. I have followed employees Hawaiian consulting with, regarding their roles being made redundant, and there's less than 20 of them.
22:41
And while they are on consultation, do I need to pay all their notice period hasn't started as yet.
22:51
There's no need to top off the, the fellow pay at this stage, It's only once notice, period, has started that you need to top up their pay to full pay at that stage.
23:04
Oh, cool.
23:06
Also, the ... file, and we understand that full resolution foundation amongst others have criticized, the new job supports came on the basis that it would not be economic to keep to part-time is rather than one full-time position. So, it will still need jobs are lost. Do you, do you agree with that?
23:27
I think that for many businesses, that will be a calculation that they'll make and find that that's, that's the case, so I'm not sure that that's quite intended in rishi's plans for all of this. The government's clearly will hope to keep more people in employment, not less. But I do think that it's actually going to be the case that for some businesses, sadly, making part-time jobs redundant and having full-time jobs, where it's possible to do that, will be an attractive option.
24:01
Call our next one.
24:04
Thank you. Might also: If you consult on part-time working, rather than full time, should it be offered to all? Could other staff come back and comb discrimination for not being offered?
24:18
Well, I suppose it depends on the particular jobs that people are doing, and whether it's within the same same area of work. There, are discrimination risks. And it depends on whether, what protected characteristics the individuals have, who've been offered the job, as opposed to those who haven't been considered. It's a difficult balancing act for all businesses. And you need to try and find as best you can, the objective reasons for the choices that you're making, rather than subjective ones, that this particular employee might be the best person as opposed to somebody else.
24:54
Cool. Oh, another one mile.
24:57
And quite frankly, we do not know and cannot predict our requirements for employees for the whole of the six months first of November.
25:07
If we join the support that job support scheme for an employee, can we leave and then rejoin later in the next six months?
25:15
That's an extremely good question. And I'd love to tell you what the answer is. But the government told us the answer to that particular question. Yet, it will be interesting to see what they do decide to do, but I suspect they probably will allow that to happen. It was a similar sort of issue in relation to furlough, and they eventually got there. So, I suspect probably the answer will be, yes, you will be able to do it. But I'm afraid at this point, I can categorically say that, OK, thank pool. And next one might, have you got any pointers around launching all voluntary redundancy school?
25:57
Yeah, so voluntary redundancy schemes are more difficult because what often you find is that the all the people That you want to keep, people who volunteer, and all the people, that you would like to go with the people who don't volunteer. So you end up with people applying for voluntary redundancy who you don't want to lose their skills. So it is always a very difficult position to take.
26:29
It's helpful in a thing people who accept from volunteers will go and that that's that's really, really helpful, because they volunteered rather than being forced to go. But you do need to think very carefully as to the skills that you need to retain in the business, and whether you're going to do that. And therefore your acceptance of applications for volunteers will very much depend on what you need for the business going forward.
27:00
Somebody has asked, why was layoff not in all contracts? And many contracts were not drafted with layoff causes. The manufacturers often had them, but not always. And often people would say, Well, I would never use it. And it's only when a global pandemic arises that suddenly people find that they really do need to use a layoff provision. So that's generally the reason why it's not there.
27:29
Like, we have another day of related question as well. Say that we, we tried to introduce ... into our contracts, and most of our employees enrolled at 3 or 4 were adamant, they wouldn't sign up. So we've pulled back. Is there anything we can do about that now?
27:47
Yeah. The difficulty in that situation is obviously you pull back from what you're doing. So you're going to need to take a little bit more time over doing this. But because you've had the majority of them agreed to this clause provisionally, then reinstating your offer to change the contracts in that way, it needs to be done as soon as possible. And you probably need to give a time limit on that, make it a few weeks. And then give notice to those employees who are not agreeing to this clause, that it will be entered into. The problem is that if the employees then do accept that, and they, they take the new change, in their terms and conditions.
28:30
You won't know how effective that is until you actually come to a situation where you need to use the layoff clause. And hopefully it won't be for some time to come. But still, I would encourage you to go back and revisit this, and if you've got other changes to do at the same time, try and include those as well.
28:48
Now, can I please encourage you to sign up for my colleague, Teaching Ahmed's webinar on the eighth of October, on the new immigration rules that are coming in, in January. If this is relevant to your business, then that's going to be a very important session for you to go to.
29:05
I'm doing another webinar on the 15th of October, I love you to join up for that. I'm gonna be talking about the job support scheme in much more detail than I've been able to do today, and I'd be delighted to, to, to lead you through all of that, if you're able to join.
29:22
Do remember that. We also legal helpline giving, access to a senior team of, of specialists, and they will give you a free, 20 minute window of advice. Either by video, or by e-mail, and the details. As you see on the screen, please book an appointment, if you'd like to, to do that, and that would be helpful to you.
29:48
Thank you so much for joining. I hope that was helpful.
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