Coronavirus Causes A Downturn In Work

The number of cases of Coronavirus in the UK are gradually increasing. All schools in England will be closed from Friday 20 March for an indefinite period of time, GCSE and A’level exams due to take place in May and June have been cancelled. Gyms, sports centres, cinemas and museums have either closed or have announced they will close. Most sporting fixtures are cancelled, including the 2020 European Football Competition and news about the 2020 Olympics is expected shortly. McDonalds have closed their restaurants and are only serving food through their drive through facilities.

If your business has been affected by Coronavirus and you have a downturn in work, you may decide to introduce a period of short time working and/or lay-offs or you may decide to close your business for a period of time.

Short Time Working

Introducing a period of short time working is a short-term solution to cutting costs without actually making a permanent reduction to your headcount.

Short-time working is where you reduce the hours the employee is required to work by reducing the number of working days and/or hours they work in a day.

As employees pay will be reduced, it is sensible to communicate with the workforce and explain the company’s thinking behind the reduction in hours, to encourage employees to be “on side”. If the reduction is to reduce or avoid redundancies, employees are likely to be more amenable to short-time working.

A period of short-time working can only be imposed where there is a contractual right to do so. Flexibility as to how hours are reduced, how long the arrangements can last, who is selected, and so on, may depend on how the contractual provisions are drafted.

Where the whole workforce or a particular section of the workforce will be affected, selection will be straightforward. If the short-time working pattern requires that you select particular employees, care should be taken to avoid any discriminatory or unfair selection process.

If there is no contractual right to impose short-time working you would need to present a proposal to the relevant employees, or their representatives, explaining why the company considers that short-time working is necessary with a view to seeking their consent.

In relation to un-worked hours, employees on short-time working may be entitled to:

  • payment if there is a contractual entitlement
  • a guarantee payment (see Lay-Offs above)
  • jobseekers allowance.

Consideration should be given as to what happens to other benefits that are calculated with reference to salary and wages paid. For example, in relation to pensions contributions these would usually be reduced proportionately.

Imposing short-time working can give employees the right to claim a redundancy payment. The legal provisions governing this are complex, but, in summary, if an employee receives less than half a week’s pay due to short-time working for four weeks in a row or six out of thirteen weeks, with no more than three weeks being consecutive. The employee will be entitled to claim a redundancy payment without actually being made redundant. A claim must be made in writing to the employer who may refuse to pay only if it believes normal working is likely to resume within four weeks.

Virgin Atlantic staff have been forced to take eight weeks of unpaid leave over the next three months to help the business survive during the Coronavirus pandemic. The airline is one of many to have brought in drastic measures to cope with a fall in passenger demand, due to global travel restrictions and the public’s reluctance to travel during a pandemic.

Lay Off

After a period of short time working or where you experience an extreme and quick downturn in work you might consider making unpaid layoffs (sending the worker home without pay). As with short-time working a period of lay off can only be imposed where there is a contractual right to do so. Flexibility as to how hours are reduced, how long the arrangements can last, who is selected, and so on, may depend on how the contractual provisions are drafted. In these circumstance the employee would be entitled to receive statutory “guarantee pay”. For this, a “lay off” is a day when less than 50% of ordinary work was provided. For the first five days of layoff in any 3 month period, employees are entitled to 50% of their normal basic pay subject to a maximum of £29 per day (£30 per day from 6 April 2020).

If your contract does not expressly say that you may lay off without pay, then ordinarily any lay off would have to be paid.

Closing Your Business

If you are closing your business but employees are able to work from home, you must pay them their normal wages.

If an employee is unable to work because you have made the decision to close the premises, this will in effect be a period of lay-off. With-holding pay could bring risks of claims for unauthorised deduction from wages, therefore unless you have a contractual clause allowing for unpaid lay-off you should pay your employee their normal wages.

If you would like me to review your contract of employment and employee handbook please get in touch.

If the government orders a general closure of workplaces, it may be that contracts are ‘frustrated’ by a supervening event. Technically this may mean that there is no obligation on employers to pay during the period of ‘frustration’. Frustration is a technical legal term, and does not simply mean “feeling upset”. We will revisit this, if necessary, in a later post.

If you have or are considering closing your business check out the Governments Coronavirus Job Retention Scheme. The scheme was announced on Friday 20 March so it’s still very early days and we are waiting for a number of details to come through. Basically the scheme is intended to avoid redundancies and protect jobs and all employers are eligible to participate in the scheme. The scheme will see HMRC reimbursing employers for 80% of wage costs up to a cap of £2,500 per month.

Top tips

Holiday Entitlement
Holiday will continue to accrue at the normal rate during a period of lay off or short time working.

As an employer you do have the right to tell employees and workers when to take holiday if you need to. For example, you can decide to shut for a week and everyone has to use their holiday entitlement. If you decide to enforce an shut down you must provide at least twice as many days as notice as the amount of days you need staff to take as holiday.

For example, if you want to close for 5 days, you would need to tell everyone at least 10 days before.

This could affect holiday staff have already booked or planned, so you should:

  • explain clearly why you need to close; and
  • try and resolve anyone’s worries about the shut down will affect their holiday entitlement and plans.

Sickness
A period of sickness absence provides a period of no work in the same way as a period of lay off. How you deal with the situation will depend on what came first.

If the employee was absent from work due to sickness before you announced the downturn in work and enforced a period of lay off then their absence would continue to be recorded as sickness.

If the employee sent you evidence of incapacity for work due to sickness after the period of lay off had been announced or had started then the absence would continue to be recorded as lay off.

What’s Next?

The government publishes daily updates at 2pm with the latest stats and advice. I will be monitoring these updates very closely and will update these pages accordingly as new information becomes available.

Up-to-date information for individuals and employers on the spread of the coronavirus can be obtained from www.hpa.org.uk

CONTRACT OF EMPLOYMENT & EMPLOYEE HANDBOOK REVIEW

An hour of my time can save MANY hours of your time!
I can review your Contract of Employment and Employee Handbook for compliance with this new legislation that takes affect on 6 April 2020 and provide a written report detailing where your contract and employee handbook will need updating. You will receive your report within 5 working days of sending me your contract and employee handbook.

If you authorise me to make the changes I have suggested in my report there will be an additional fee. My written report will confirm the fees and anticipated timescales.

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Coronavirus Causes A Downturn In Work