Lay-offs are a very effective cost-saving measure in the event of an unforeseen downturn in work and an attempt to avoid redundancies where possible.
By Catherine Kerr, Partner and Head of Employment Law
As COVID-19 continues to have a devastating impact on a host of industries including travel, hospitality and events, we take a look at the measures employers can use to survive in such a tough and uncertain environment.
This appears to be the “go to” option for many employers at the moment due to the lack of sufficient work for their employees. This can be seen as a very effective cost-saving measure in the event of an unforeseen downturn in available work and an attempt to avoid redundancies where possible.
In order to be applied however, there must be a lay-off clause present in the particular employee’s contract. If you do not have a lay-off clause in your employment contracts, you will need to consult with staff and gain their consent for such a variation. In practical terms, lay-off will mean that employees are sent home with no work and no pay but they will however, still be retained as employees and may return once the downturn in appropriate work has been resolved (hopefully!)
Short-time working is an alternative to lay-off procedures and may be used where there is a reduced amount of work rather than no work for a particular employee. Short-time working means employees will still be doing work but would work less and as a result be paid less. A number of employees would be laid-off for a number of days each week or for certain hours of a working day. Similarly to lay-off, for a business to use short-time procedures their contracts of employment must include clauses allowing for such procedures to be taken or consent must be given.
It is worth noting that in relation to both of these measures, they may only be used for a reasonable amount of time. Once an employee is laid-off or short-time working for four or more consecutive weeks or a total of six weeks in a thirteen week period, they may raise a grievance or issue a notice of their intention to make a claim for a statutory redundancy payment. Accordingly, such measures are only temporary and may ultimately not be the solution if the adverse impact of COVID-19 on a business are in excess of that period. They could, however, give a business the breathing room it needs to get through the crisis.
As employees will remain employed during periods of lay-off or short-time working, their holiday entitlement will continue to accrue. Therefore, businesses should think about asking employees to take holidays now rather than them accruing to be used en-mass when the travel restrictions and other temporary government advice regarding social distancing has passed.
If not, businesses run the risk of production being affected way beyond the coronavirus outbreak as employees try and take lots of holiday at the back end of the year. It might even be useful for employers to allow employees to carry-over holiday into the next holiday year to avoid any further disruption.
Although this should be seen as the “worst-case scenario” a business may be put in a situation where redundancies are unavoidable in seeking to ensure the long-term health of the business. A business should first seek volunteers for redundancy in affected departments, then move on to redundancy consultation with appropriate pools and redundancy selection criteria.
At such uncertain times, businesses should consider the above approaches and ultimately make decisions based on what is essential for the continuation of their business.