Redundancies can be costly, both in terms of pay-offs and the future expense of rehiring once business improves.
Danny Cooper, manager of architect firm RLT Built Environment, decided to reduce the working week for some of his staff in September.
‘We wanted to retain our staff as the whole process of recruiting and training people can be very lengthy, but we really needed to do something about our cash flow. This time last year we were expanding and it was hard to find people who were suitable,’ he says.
‘If you’ve got two people who are working half a week it’s the same cost-saving as one person being made redundant, but you have the flexibility to move them back up to full- time when things improve.
‘It was in the contract anyway, but it still wasn’t popular with our staff – although they could see the problem that we were in. We made it more palatable by reassuring them it was only short-term, and they would be brought back up to full-time hours when things improved. Hopefully, it will just be for another four to six weeks when we have some more work coming in and can do so.’
Terms of contract
Nic Hart, employment law partner at Davenport Lyons, says that enquiries from a range of businesses across different sectors and sizes regarding short-time working have increased massively over the past four months.
‘From anecdotal experience, employees in various organisations are saying they will take a pay cut through short-time working for the greater good of the company,’ says Hart.
If you do not have an express term in the contract, and your employees do not agree to a reduction of hours, the route to short-time working can be more complex. In this instance, any change in pay/hours could leave you open to being sued for a breach of contract.
If they do not agree to it you will need to go through the process of consulting with your employees. This can take 30 days if you have more than 20 staff, or 90 days if you have more than 99 staff. You will then need to give notice for the termination of the old contract before you can draw a new one.
Hart adds: ‘My first advice would be to look at the contract, and seek to do a deal, then contact a consultant. If staff do agree to a change in hours straight away you will still need to draw up a new contract – but that’s very easy to do.’
Benefits to staff
John Purcell, adviser to employment body Acas, believes that when cuts need to be made, a reduction in hours can be the best option available for both your business and staff.
He says: ‘Short-time working can seem more beneficial to employees compared to working full-time, but for less money. It is also something that certain employees quite like as they can spend more time with their family. Of course for some it will still be particularly difficult.’
Purcell adds that as an alternative to redundancies it can also have a less damaging effect on your workforce as a whole. ‘It means your staff will be less likely to suffer from survivor syndrome where those left behind worry about their friends who lost their jobs and feel guilty for still being there,’ he adds.
A temporary measure
Short-time working should not be seen as an alternative to avoiding redundancies altogether, as there is a risk that after a certain period, employees can resign anyway and claim pay offs.
‘It’s worth mentioning that if you have an employee who has 20 years of experience, they will start to think of redundancy as their right. And if they are over 40, at the basic pay, that can be a chunky amount of money,’ adds Davenport Lyons’ Hart.
For more information on short-time working visit the Acas website.
Related: Financial need to reduce staff hours – “We are in debt and finding it hard to pay suppliers. If we reduce the hours of our 15 employees to cut costs, what are the legal considerations?”
