Introducing A Reduced Working Week After Furlough

If your business has work for some or all of your staff but not at the level before the Coronavirus restrictions were imposed you may be considering introducing a reduced working week on a temporary basis. The Coronavirus Job Retention Scheme comes to an end on 31 October and is replaced by the Normal Job Support Scheme and Extended Job Support Scheme that operate from 1 November through to 30 April 2021. The aim of the new Job Support Scheme is to protect ‘viable jobs’ in businesses which are ‘facing lower demand over the winter months due to Coronavirus, to help keep their employees attached to the workforce’.

Employers who claim under the scheme, must provide employees with work for at least 33% of their normal working time. The company will pay for the time worked, but the cost of hours not worked will be split equally between the employer, the Government (through a wage support grant) and the employee (through a wage reduction).

If you can’t guarantee you will have enough work available for applicable employees over the next few months you will have to consider either introducing a reduced working week or reducing your headcount by making some employees redundant.

Normal Job Support Scheme Points To Note

  • The Government has said that as the Job Support Scheme progresses they may increase the minimum hours threshold and so this could become more onerous financially.
  • Also, the Governmemnt have already made it clear that the Job Support Scheme is aimed at supporting viable jobs and can not be used to support the wages of any employee who has been issued with notice of redundancy. This means if you are considering reducing your headcount you would not be able to use the new scheme for those employees.
  • If you don’t have enough work for all of your employees, you may find it will cost you less to keep some of them on their normal contracted hours and make the others redundant, rather than reducing the hours of all of them and claiming the Job Support Scheme for them.

The Normal Job Support Scheme won’t suit every business, if it doesn’t suit you and you don’t have enough work for everyone you will need to consider redundancies, introduce a reduced working week or maybe a combination of the two.

Introducing A Reduced Working Week After Furlough

If you introduce a reduced working week for furloughed employees after 31 October you would need to agree in writing the temporary contractual change.

You’ll need to be clear about the reasons for reducing working hours and be prepared to respond to questions from staff. You also may need to consider how you ‘sell’ the idea when furloughed staff have been receiving 80% when not required to work and now you are asking them to do work and receive less money; and those who have been working normal hours may feel demotivated at being asked to take home less pay when they have kept the business going through a very difficult time.

Varying the terms of the employment contracts can be problematic, particularly if employees are not favourable to the changes.

How To Change The Terms Of An Existing Employment Contract

Where the change is clearly beneficial to the employees, the variation of contract is unlikely to result in any challenge from them, but you should still understand the legal implications of varying contracts. However, as the reasons for the changes you are going to propose are to reduce expenditure the result will be that the employees take home pay will reduce and therefore you are likely to face some opposition to those changed.

In order for the process to be deemed to have been fair some form of genuine consultation and communication should take place.

Timing Considerations
The timing of the process could be one of the most crucial considerations as you will no doubt want to time the changes to coincide with the end of the furlough scheme on 31 October 2020. How long it will take you to achieve the variation of the employees’ contracts will depend on the nature of the changes proposed and how cooperative the employees are.

Communicating The Reasons For The Change
Communication with employees is key to obtaining their consent to any variation. The communication should inform the employees of the reason for the change and the proposed date for implementation, it should also set out the possible effects of the change and seek employees feedback.

In the current climate the reasons for the change will be due to the ending of the furlough scheme and not been able to guarantee enough working time to benefit from the Job Support Scheme. Being able to demonstrate to staff why the change is necessary can help achieve “buy-in” from employees and their agreement to the change. You will also need to show that you have a genuine business reason for imposing the change.

The proposed date for implementation is likely to be 31 October 2020, to tie in with end of the Furlough Scheme.

Because the outcome of the change will be reduced pay you will need to highlight the negative consequences of not making the change and offering incentives to persuade staff to agree, particularly if the changes are detrimental. An incentive does not need to be a financial advantage; it could be any measure that is beneficial to the employees, for example a revised shift pattern or working from home rather than in the office. As the changes you are proposing are necessary for financial reasons and the alternative may be redundancies, you should explain this to the employees and seek to reach agreement on the changes to avoid or reduce the need to make employees redundant.

Depending how deep you are considering cutting hours and pay you may need to consider whether to offer to gradually phase the changes in to help your employees adjust.

Example Communication To Employees
As you aware from the weekly/monthly updates the affect of the Coronavirus pandemic on the business has been severe. Many clients have been closed completely and consequently have either substabtially reduced their spending or have stopped spending completely. By way of comparison at the end of September 2019 we had turned over £___________. By the end of September 2020 we had turned over £_________, as you can see that’s a **% reduction in business. The furlough scheme has prevented us from having to make redundancies, unfortunately as business currently stands we can not guarantee you enough work each week to benefit from the new Job Support Scheme, however should that change we will certainly look at signing up to that scheme. This means that unfornately the business will not be in a position to pay your pre-lockdown wages/salary when the furlough scheme ends on 31 October 2020 when there is virtually no work coming in.

**% of our business costs are wages/salaries so there is no other option than to try and reduce those costs to enable the business to survive.

We are really keen to do whatever we can to safeguard all your jobs and, to do this we propose the following:

Individual Consultation
As well as communicating with the affected employees you should also consider holding individual consultation meetings with employees. Individual meetings are an opportunity for you to discuss with the employee any reasons for objecting to the change and explore whether or not there is anything that can be done on an individual level to obtain their agreement. For example, if the proposed variation is a reduction in pay the employee may agree to it on the condition that they can work from home as the reduction in travel costs would help offset the reduction in pay been at home may also help reduce childcare costs.

There are no set time scales within which consultation should take place where less than 20 people involved. However, the shorter the consultation period, the more likely an employment tribunal will question the fairness and quality of the consultation. Case law suggests that the bare minimum period is 7 days’ but we would advise you to consider a 14 day period to enhance your prospects of establishing the consultation period as fair. This allows you to demonstrate that you gave the employee adequate time in which to respond to your proposals and that the employee’s response was properly considered before you reached a final decision. If an affected employee is not consulted until late in the process, an employment tribunal may also question the adequacy of the consultation.

Avoiding Discrimination
You should consider the potential “knock-on” effects of contractual changes, such as risks arising under discrimination or equal pay legislation. For example, changing working hours or shift patterns could constitute indirect sex discrimination if they make it more difficult for employees with childcare responsibilities to attend work, as this is likely to affect a greater number of female employees. Always consider alternative, non-discriminatory, options if you identify a risk of indirect discrimination and should go ahead with the variation only if you are satisfied that it can be justified.

TUPE Considerations
If you have employees who have transferred to you under TUPE, their terms and conditions will be protected to some extent. Broadly speaking, the terms and conditions of transferring employees can be changed only where the transfer is not the reason for the change or where the change is for an economic, technical or organisational reason that involves changes in the workforce. There is no particular point beyond which the connection to the transfer will be “broken”, although the further away from the transfer that the changes are made, the stronger the argument that the transfer is not the reason for the change may become. Employees may also become less likely to bring a claim, the further they are away from the date of the transfer.

The TUPE Regulations are amended from 31 January 2014 to allow employers to make a variation to employees’ terms and conditions that would otherwise be void under TUPE, where there is a contractual clause that authorises the variation, e.g. a mobility clause. The amendment applies in relation to transfers that take place on or after 31 January 2014 and where the purported variation is agreed, or starts to have effect, on or after that date. You must still follow the required procedure to achieve the variation. However, there is a question over whether or not this provision complies with the Acquired Rights Directive (2001/23/EC), which the TUPE Regulations are intended to implement.

Obtaining Express Agreement To The Change
Obtaining express agreement to the change is the safest option open to employers. While the employees’ verbal consent to the change will be sufficient, written consent is always preferable as it avoids confusion that may lead to potential disputes. With good communication on the reasons for the change, employees will often respond positively when asked for their consent in writing.

If employees do not respond to the request for their consent to a variation, whether you can take their silence as consent will depend on the nature of the change. If the change has an immediate effect, for example changes to pay, it will be difficult for employees to show that they have not accepted the change if they do not object within a relatively short period of time. This will, however, always depend on the facts of the case.

If the change has no immediate impact, for example the imposition of a mobility clause or restrictive covenants, it will be much harder for the employer to establish the employees’ agreement through silence.

Implementing The Changes
To implement the changes with the consent of the employees you will need to send each employee a letter setting out the changes to their terms and conditions and when they will take effect. The letter should request that the employee confirm that they acknowledge and understand the change by signing a copy of the letter and returning it to you.

If changes are made to any of the employment particulars that must be included in the employees’ written statement of terms and conditions (under s.1 of the Employment Rights Act 1996), you must confirm the changes in writing to the employees within one month of the changes becoming effective. Failure to do this can lead to you being liable for either two or four weeks’ pay (subject to the statutory cap on a week’s pay), provided that the employee also brings a substantive claim (eg unfair or wrongful dismissal) before the tribunal.

Problem Areas To Be Aware Of

Dismissal And Re-engagement

If employees refuse to consent to a variation and you wish to go ahead with the implementing the changes, and there is no flexibility clause in the contract of employment, you have the option of dismissing and re-engaging the employees. To do this, you would issue the employees with a new contract of employment, which they must sign to indicate acceptance of the new terms, and at the same time gives them notice of termination of their old contract of employment. This should happen only after a proper process of consultation has taken place. Each employee has the choice of staying with you on the new terms, after the expiry of the old contract, or leaving on its expiry. In either case the employee can bring an unfair dismissal claim, if they have the required service. The prospect of dismissal and re-engagement is often effective, as many employees will accept the variation rather than leave employment.

If there are more than 20 employees involved then the requirement to consult collectively with employees in relation to a variation of contract would have to be filtered into the process. This is because the definition of redundancy under s.195 of the Trade Union and Labour Relations (Consolidation) Act 1992 is “dismissal for a reason not related to the individual concerned”. Where an employer is proposing to dismiss staff to introduce changes to employment terms, this will qualify as a redundancy dismissal for the purpose of collective consultation. It is not, however, a redundancy for the purpose of qualifying for a statutory redundancy payment, since that definition is much narrower.

If you are proposing to dismiss and re-engage employees you must ensure that you follows a fair procedure in carrying out any dismissals. Although the matter does not concern discipline, compliance with the principles of the “ACAS code of practice on disciplinary and grievance procedures” will assist you employer in ensuring procedural fairness. In practice, this means you should hold individual meetings with each objecting employee and offer them the same safeguards during the process as they would receive under your disciplinary policy, for example the right to be accompanied, the opportunity to state their case at the meeting and the right to appeal the decision.

If you decide to go ahead with dismissal and re-engagement of employees who do not agree to the variation, you must give them the appropriate period of notice: either the notice required under their contracts or the statutory minimum notice if this is longer. This can cause difficulties as not all employees will have the same notice periods and the desire will normally be to implement the change on the same date for everyone. To deal with this issue, you can consider making payments in lieu of notice, although this carries a cost because, in effect, it means paying the employees twice for the same period and pay in lieu of notice cannot be reclaimed through the Coronavirus Job Retention Scheme.

The employer should send each employee his or her written notice of termination, enclosing the offer of re-engagement on the revised terms. The new contract of employment should begin immediately after the expiry of the notice period.

To defend an unfair dismissal claim, you would have to rely on “some other substantial reason”, which is a potentially fair reason for dismissal under the Employment Rights Act 1996. In determining whether or not the dismissal was fair, the tribunal would examine, first, the reasons for the changes and, second, whether or not a fair procedure was adopted in implementing those changes. You must therefore, be able to show that you have a genuine business reason for making the variation to employees’ contracts. This means that you must be able to point to some practical advantage, but there is no need to prove a financial gain.

Risks Of Imposing A Change Without Consent
Varying employees’ terms and conditions without obtaining consent to the change can be extremely risky. Other than in cases involving changes that are clearly non-contractual failing to consult with employees about the changes would allow the affected employees to raise a constructive unfair dismissal claim.

Essentially, the risk in this approach lies in its uncertainty. Attemptin to vary the employment contract without consent allows the employees to do one of three things: “stand and sue” (i.e. remain in employment and bring a claim against you); resign and claim constructive unfair dismissal; or waive the breach of contract.

  • “Stand and Sue”
    There are two claims that employees may be able to bring if they stand and sue. The first, and most common, is for breach of contract, where the employees seek to recover damages from you, while continuing to work under protest. This will be an option only where the employee has a monetary claim.

    The employee needs to point to a clear breach of contract (i.e. the imposition of new terms), but does not need to demonstrate that the breach is a fundamental one. The business reasons why you have made the change to the contract, and the fact that you may have acted reasonably, do not come into the equation and are no defence to a breach of contract claim. Those arguments are relevant only in defending an unfair dismissal claim.

    The second claim that employees may be able to bring when standing and suing is an unfair dismissal claim, provided that they can show that the variation of the contract constitutes
    a fundamental breach, which a severe reduction in pay would be. Many employers find this surprising, as, of course, the individual concerned will continue to be employed. However, the effect of a fundamental breach will be to terminate the old contract. This means that a dismissal will have taken place, notwithstanding the fact that the employee has continued to work for you under a new contract.

  • Leave and Sue for Constructive Unfair Dismissal
    If the unilateral variation is sufficiently fundamental, the employee will be entitled to resign and claim that they have been constructively unfairly dismissed.

  • Waive the Breach of Contract
    If employees do not take action promptly after having been made aware of the unilateral variation, they may be taken to have waived the breach of contract. You should notify employees of any variation to their contract in good time. There is no set time period after which the breach is deemed to have been waived. If employees waive the breach, they will be deemed to have accepted the new contractual terms.

Reliance On Contractual Clauses That Authorises Changes
Some contracts of employment have express clauses that allow the employer to make specific changes to certain terms and conditions. These commonly provide for changes to the employee’s place of work, job content and hours of work. For example, a contract may provide that, in addition to the duties contained within the specific job description, the employee will be required to carry out other duties within their capabilities as the needs of the business require. Alternatively, a contract may provide the employer with a general power to vary any of its terms.

Even where there is a clause that appears to give the employer the power to change the contract, you should approach the process with caution because such clauses tend to be interpreted restrictively by the courts and implied terms in the contract may limit the effect of the clause. Before proceeding you should:

  • check that the flexibility clause covers the specific change that you are proposing;
  • consult on the change with affected employees; and
  • ensure that you act reasonably when operating the clause.

As part of the consultation exercise, you should attempt to obtain employees’ express consent to the variation as this will remove the risk of claims that the clause does not allow the change or that you have acted unreasonably.

General flexibility clauses that appear to allow you to change anything at any time are unlikely to be effective except for minor changes, or for changes where there is no practical effect for the employee, for example changing a benefits provider where the benefit provided remains the same.

National Semiconductor (UK) Ltd v Church & Ors EAT/252/97
In this case a number of employees were employed to work 25 hours exclusively at weekends. Their contracts contained provisions stating: “although you are employed in the shift/position quoted, production requirements may change from time to time and it is a condition of employment that you should be able, with due notice, to change to other shift/positions”. The employer sought to rely on this clause when it changed the employees’ working hours so that they worked 42 hours a week, throughout the week. The Employment Appeal Tribunal (EAT ) held that this was a breach of contract. The flexibility clause allowed the employer only to re-arrange the hours that the employees worked, not increase the number.

If you have any questions please call me on 0114 360 0626 or simply email me at enquiries@kea-hr.co.uk.

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Introducing A Reduced Working Week After Furlough