Cutting an employee’s hours has frequently been seen as an alternative to redundancy. Whilst it is still a delicate – and potentially contentious – matter, it can often be a necessity for a growing business, particularly during quieter months.
Following recent cases in the Employment Appeal Tribunal, it now appears that any employee who has had their hours cut, may be entitled to claim a redundancy payment. This can leave the employer in a difficult position, as reducing hours across the workforce could potentially lead to many employees leaving and claiming a redundancy payment – just what the employer wanted to avoid. So, what is the best approach for an employer needing to make cut-backs, but one who doesn’t want to lose staff? Michael Ball, employment partner at Gateley, provides his top ten tips.
1. Use flexibility clauses
Some contracts will contain express flexibility clauses, providing the employer with the right to make changes to the contractual terms and conditions, especially in regards to hours of work and location. Making changes, by exercising this right under the contract, will avoid any dismissal. However, the power to vary must be exercised reasonably. Simply imposing a change without consultation, and without providing a reasonable period of notice, may breach the implied term of mutual trust and confidence.
2. Look for alternatives to redundancy
Redundancy should rightly be seen as a last resort. It can cause disruption, damage morale, cost money and have a negative impact on the company’s reputation. Loss of good staff can also weaken a business’ ability to react when there is an upturn. Taking a long term view may be better. Therefore, it makes sense, both commercially and legally, to fully explore alternatives, such as temporary short-time working for all by agreement, to avoid compulsory redundancies.
3. Avoid breaching the contract
There are a number of options when trying to save costs. However, imposing changes such as a reduction in pay or hours will be a fundamental breach of contract. This will provide the employee with grounds to bring a number of claims against the company. There is the risk that the employee could resign and claim they have been constructively dismissed; if they decide to stay, they could bring a claim for the outstanding wages, so it is always better to get agreement to changes.
4. Communicate with the workforce
This is really important. If employees are left in the dark, it’s going to be difficult to get them ‘on board’ with contractual changes. If members of staff can be persuaded to reduce their hours, then no risk of redundancy will arise. Tactically, managers should challenge the old contract and explain why change is needed – for example, due to financial pressures. If the alternative is a more formal restructuring process, which ultimately leads to job losses, employees should be made aware of this. As a result, they are more likely to view the proposed change as the lesser of two evils.
5. Allow time for preparation for change
Do all of the changes have to be implemented at one time? It may be possible to make some modifications, such as those relating to remuneration or hours of work, on a staggered basis. This may help to make the ultimate change easier, particularly as employees often find the suddenness more disconcerting than the actual change itself.
6. Get employees more involved
It might be possible to create transitional structures to manage change. Central to the management of change in a workplace is securing the buy-in of employees and adopting an effective communications strategy. If you fail to effectively achieve this, it may result in damage to employee relations and attempts to sabotage the changes.
7. Ensure that you act consistently
Consistency in words and actions across the organisation is vital. If some employees face pay reductions, whilst others – perhaps higher up the scale – are allowed to keep their full salary, it will not only cause resentment, but will lose the trust of the employee.
8. Reward where possible
Consider if staff can be offered any incentive to help them accept the change? Is it taking place at the same time as a pay review? Offering an additional benefit, as a trade-off for a detrimental change, is often an effective way of securing agreement. This does not necessarily have to be a financial benefit; there may be other non-financial benefits that could encourage staff to agree to the new working hours.
9. Budget for redundancy pay
If, after consultation, it is clear that the employees will not agree to contractual changes, one option is to provide the employee with notice of dismissal and then offer to re-engage on the new contract. However, following recent case law, if the new contract has fewer hours than the original, it would appear that the employee will have the right to refuse the new contract and claim redundancy pay – this will need to be taken into account when assessing the costs. In practice, this means that it is not an option to try and reduce the hours of the entire workforce in this manner and then claim it is not a redundancy situation.
10. Keep the best employees
If there are no alternatives to redundancy, make sure that the most capable employees are retained to safeguard the future of the business. Redundancy selection criteria should be applied to all employees at risk and it’s important that it reflects the skills and qualities needed in the future.