If as a business you are experiencing a downturn in work as a result of the coronavirus, you may have to consider short-time working or lay-offs, or in the worst-case scenario, redundancies. Whether you can reduce working hours or lay employees off will depend on contractual terms or the agreement of the workforce.
Contract allowing lay-off and short time working
If you have in your employees’ contracts of employment an express contractual provision to lay off or impose short term working, you will be able to rely on this clause in these difficult circumstances. You may also be able to lay off employees if there is custom or practice within your business for doing this (which is not a usual practice for most businesses).
Any employees laid off are entitled to a statutory guarantee payment if you do not provide them with a full day’s work when they would usually work. In most circumstances employees will be entitled to up to £29 (to 6 April 2020, when the rate increases to £30) a day for 5 days in any 3 months.
There are complicated provisions allowing employees to claim a statutory redundancy payment if the lay off or short time working runs for 4 or more weeks in a row or 6 or more weeks in a 13 week period (where no more than 3 are in a row). However, the employee must give written notice in advance if they are going to claim a redundancy payment and you can give counter-notice if it is expected work will resume within 4 weeks. It is very important to comply with the time limits in the statutory scheme.
No lay off or short time working provisions in the contract
If you lay off or impose short time working without the contractual right to do so, employees may resign and claim constructive unfair dismissal, although this is probably unlikely given the current situation. However, if a lay off is imposed, employees may instead claim an unlawful deduction from wages. Given the unprecedented situation businesses are currently facing, it is likely that as an employer you will be able to agree a variation of terms and conditions with your workforce either to reduce working hours or take a period of unpaid leave.
If you have more than 20 employees at any one establishment, S188 Trade Union and Labour Relations (Consolidation) Act 1992 is likely to be triggered by a variation of terms if staff don’t agree and therefore you will need to consult with either elected representatives of the workforce or any recognised trade union. It is likely in these circumstances it would not be necessary to consult for either 30 or 45 days and instead rely on the special circumstances defence, however this does not mean that you can ignore the provisions and you need to do what is reasonably practicable in the circumstances. This defence has rarely been successful in the past, however given the current situation, Employment Tribunals may well adopt a different, pragmatic approach. However, we are in uncharted waters.
Lobbying the government
A number of organisations (including us) are lobbying the government to introduce a statutory right to provide for lay off and short time working in these unprecedented times, together (importantly) with measures to help those laid-off including increased and extended guarantee payments and mortgage holidays. If you are a member of a trade organisation or other lobbying body, this is something you may wish to ask them to escalate.
Extension of IR35 postponed to 6 April 2021
The off-payroll tax rules aimed at making contractors who provides their services through an intermediary (for example, their own limited company) subject to broadly the same tax and National Insurance contributions as employees, have been postponed for a year.
Many had called for this anyway and it’s certainly a headache many businesses and self-employed contractors don’t need at the present time!
This alert does not provide a full statement of the law and readers are advised to take legal advice before taking any action based on the information contained herein.
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