Covid-19 is affecting individuals and businesses on a local, national and global scale. An enormous number of businesses are facing sudden, unexpected economic and other business-related pressures (particularly, in the retail, restaurant, hospitality and travel sectors). Reductions in work or sales and increasing numbers of late (or no) payment from customers, without any decrease in business costs, have combined with forced closures (and the threat of further closures) of public-facing businesses to create substantial cashflow problems for many businesses. Numerous businesses have either already closed or gone into liquidation or administration or are close to being forced into doing so.
When businesses run into financial difficulties, they often immediately seek to reduce overheads by making some employees redundant. However, redundancy is rarely the only option available to employers and, in many cases, it will not be the cheapest or best option for an employer (or an employee).
At the time of writing, no-one has a clear idea as to the likely duration of the Covid-19 outbreak. National and international health organisations appear to consider that it will continue for several months. Whilst that period may be too long for some businesses, others may be able to put in place temporary solutions which enable them to successfully navigate their way through the Covid-19 outbreak together with all or most of their employees. We have set out below a number of potential solutions, which employers may wish to consider. The majority of these will need to involve careful communication with their employees. At a time of crisis like the Covid-19 outbreak, it is in the interests of all parties to find solutions, where possible.
It is important for employers to bear in mind that making people redundant may not be a cheap option. Redundancy procedures are likely to take time, redundancy payments will need to be made, settlement agreements may be required and Solicitors may be required to finalise those settlement agreements and ensure that the correct procedures are followed. If mistakes are made in the way redundancies are handled, claims may be made and further time and costs may be incurred. Redundancy also gives rise to other potential problems including, the loss of valuable skills and experience, the negative impact on the morale of retained staff and the time and costs incurred when recruiting again once the Covid-19 outbreak is over. Re-recruiting is expensive in terms of direct and indirect costs, for example, in terms of advertising, management time, induction and training costs.
As part of this process, business owners are, inevitably, going to have to carry out an overall review of their business rapidly in order to determine their current position and requirements, the potential effects of the Covid-19 outbreak on their business and its requirements and their longer term requirements once the Covid-19 outbreak is over or its impact sufficiently reduced.
The UK Government has implemented a number of measures in order to try to assist businesses, business owners and employees. Several of these involve the temporary removal, reduction or deferral of business costs and others involve the direct underwriting of the costs of retaining employees. Those may be sufficient to avoid or reduce the prospects of some businesses closing or needing to make employees redundant. Certainly, they will need to be included in any overall review carried out by any business.
The range of potential solutions referred to below include scenarios where businesses may be able to reduce costs, change existing staffing (or other) procedures or vary the terms of employment in order to achieve a temporary solution which will enable them and their employees to navigate their way through the Covid-19 outbreak together. It may be possible to conveniently link a number of these potential solutions, in some cases.
Potential solutions, which may enable you to reduce or avoid making employees redundant, may include:
Some of the above solutions may be permitted by contract, statute or common law. Other solutions will require the agreement of some or all employees. In each case, it is advisable to take proper legal advice in order to ensure that you comply with all of the relevant legal requirements.
Need to talk?
Whatever stage you or your business has reached, we can help you to understand the different legal and related issues relating to the coronavirus outbreak, redundancy and alternatives to redundancy so that you can choose the option that is right for you and/or your business.
If you would like more information about the coronavirus outbreak, redundancy and alternatives to redundancy or would like to discuss a potential or existing issue, please contact us by telephone on +44 (0)20 3126 4520 or +45 38 88 16 00 or by email at firstname.lastname@example.org
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full Legal Notices on our website.
©Orr Litchfield 2020