Restructuring the workplace post Covid-19 - FAQs for employers
25 February 2022
As the furlough scheme has now ended, some employers are focused on cost-saving measures in the face of ongoing economic challenges.
In light of the recently launched “Living with Covid” strategy, many of the Covid measures in England are changing significantly. We have written about this here. We are in the process of updating these FAQs to reflect the changes to the law and guidance.
We set out below our answers to key questions about options for restructuring the workforce. These cover options for extending furlough (despite the government scheme having ended), changing terms and conditions, and dealing with redundancies.
See also our FAQs for employers on the Coronavirus Job Retention Scheme for detailed information about how the government's furlough scheme operated.
Extending furlough even though the scheme has ended
Can we keep employees on furlough even though the extended government scheme has ended?
Yes. The Coronavirus Job Retention Scheme created a form of agreed lay off even where there was no contractual lay-off provision. As a result, provided employees continue to agree to being on furlough, it would be possible to extend the period for they are furloughed. This could reduce pay below the current furlough grant, or even implement furlough on no pay. Employees may be willing to agree to this as an alternative to redundancy. However, you will no longer be able to reclaim salary or other wage costs from the furlough scheme now it has ended, which will of course limit its attractiveness.
If you have a contractual right to lay off without pay, this could be relied on (although such clauses in contracts are quite rare in practice). Lay-off provisions are subject to the implied term of trust and confidence which means, for example, that you should consult with employees first and give reasonable notice of any lay off to avoid being in breach of contract.
There are also specific statutory provisions which provide a right for employees who have been laid off for four or more consecutive weeks, or six weeks in any 13-week period, to claim a statutory redundancy payment in certain circumstances. However, the scheme requires employees to resign in order to receive their redundancy payment.
Changing terms and conditions
Can we reduce hours and pay for employees?
Yes, with employee agreement.
If you recognise a trade union for collective bargaining purposes, you may be able to agree the change with the union - depending on the terms of any collective agreement, this may either be binding on all employees or may at least facilitate individual agreement. If there is no union, individual employee consent should be obtained and evidenced in writing (absent clauses permitting you to impose unilateral reductions, which are extremely rare).
If you are seeking agreement before you have formulated any proposal to dismiss 20 or more employees, a collective redundancy consultation will not be triggered. This means that you must not have formulated a definite plan that is likely to result in dismissals if employees do not agree to the proposed change. If a proposal has already been formulated to dismiss as redundant anyone who does not agree, or to force the change through by dismissing and re-engaging if necessary, then collective consultation will arguably be triggered.
Alternatively, if there is a contractual right to impose short-time working this could be used (subject to consultation and notice).
Can we reduce pay for employees but require them to work the same hours?
Yes - the process is as set out above. It may be more difficult to persuade employees to agree to this. You will need to ensure you explain the rationale, reasons and business cost in detail to minimise employee discontent. You also need to ensure for low paid employees that, if their pay is reduced but their hours are not, you still continue to comply with minimum wage legislation.
What if an employee refuses to agree to the proposed change?
You will need to consult individually with the employee and attempt to explain the reasons and necessity for the proposed change. If the employee still refuses after additional time and further discussion, you will need to decide on whether to impose the change by dismissal and re-engagement on the new terms or adopt different measures.
Dismissals in these circumstances can be fair, so long as there is a clear business necessity for the change and the employer has followed a fair process. Dismissal and re-engagement in this way will trigger collective consultation requirements where 20 or more dismissals are proposed.
Do we need to collectively consult with our workforce before making redundancies?
It depends on the number of employees involved. Collective consultation is required where an employer proposes to dismiss 20 or more employees “at one establishment” in a 90-day period for a reason unrelated to the individual, which encompasses both “classic” redundancies and “fire and rehire” exercises aimed at imposing less favourable terms. If fewer than 20 redundancies are anticipated, only individual consultation is required. We always recommend taking advice on your particular circumstances before embarking on collective consultation.
For an explanation of what collective consultation involves, see our inbrief on collective redundancies.
How do we collectively consult a workforce who are working reduced hours or remote working?
Coronavirus has created a situation where many employees are working from home, self-isolating or practising social distancing. This is likely to continue during 2021, particularly as more employers introduce hybrid and flexible working. This makes collective consultation a challenge, as it would normally be done in person.
Previous case law has shown that carrying out information and consultation obligations remotely is permissible, and it is unlikely that this would be regarded as a problem in the current circumstances.
Employers can hold online “town halls” to inform employees about proposed measures and prepare to run several of these to ensure the whole workforce is notified properly rather than via the grapevine.
Collective consultation with employee representatives could be done remotely provided appropriate technology is in place. It could also potentially be done in person with appropriate risk assessments and protective measures and subject to consideration of current government guidance.
If done remotely, you should make sure that all the representatives have the technology required to participate. You should also ensure that only relevant parties receive an invitation to the online meeting, and that the line or portal for hosting it is secure and compliant for data protection purposes. Set a clear protocol in advance about how the meeting will be run.
If employee representatives have not already been elected, employers will need to consider what arrangements they need to make to ensure any election is fair. This may include arranging online voting. The voting process is supposed to be secret so far as reasonably practicable, which can present a challenge when it cannot happen in the physical workplace. Some possible options are:
- Use a third-party online voting platform, which ensures anonymity but may come at a cost.
- Design your own internal system. For example, you could nominate one independent person to run the ballot – although strictly this would not then be a secret election.
- Set up a consultation body in advance, which (provided its mandate is sufficiently clear) can then be used for redundancy consultation later on.
How do we carry out individual consultation with employees who are remote working?
First, you need to think about how you will contact your employees and how will you send them relevant paperwork. Do you have their home email addresses (if they no longer have access to office email or never had it), do you have a home/mobile telephone number, and do you know if the employees have access to a computer?
For people without access to a computer, you could post or courier documents. If individuals will be reading emailed documents on a smartphone, consider formatting issues and what type of document to send.
If you propose to carry out the individual consultation meetings by video conferencing, check the employee (and, if applicable, any person accompanying them) will have access to a computer or smartphone. Alternatively, you can consult by conference call, but bear in mind that it will be harder to see how people are reacting to the news. If someone is working reduced hours and in the workplace for some of the time, consider whether some or all of the consultation can happen face-to-face (with appropriate health and safety measures) on days they are working.
It is a common practice to allow the employee to be accompanied at redundancy consultation meetings (and any appeal meeting) by a colleague or trade union representative, although this is not a statutory right.
Although you are under no legal obligation to allow the employee to be accompanied by a friend or a family member, this may be allowed under your own policies and procedures or as a discretionary measure in these unusual circumstances. Check the wording of any redundancy policy for any such provisions. In practice, it will be difficult for you to ensure nobody else is present in the room while holding the meeting remotely (especially if this is by phone rather than videoconference) – so it might be sensible to allow a friend or family member to accompany the employee.
Think about the following:
- Ensure that only relevant parties receive an invitation to the online meeting, and that the line or online portal for hosting the meeting is secure and compliant for data protection purposes.
- Ask the employee to attend the virtual meeting from a private and quiet room if possible where they will not be disturbed, and discuss their particular circumstances with them.
- Ask parties to speak clearly, let them ask questions when necessary and confirm their understanding. Parties should be asked to mute themselves when they are not speaking to avoid any distractions. Make use of online tools, such as screen sharing, to refer to documents.
- Explain that you will be taking notes of the meeting and will share a copy of the minutes/notes with them. Remind them that they may also take their own notes during the meeting.
- At the start of the meeting, ask the employee to confirm that they (or any companion) are not recording the meeting. If you are concerned about this, remind them that they do not have a legal right to record the meeting and that this may be viewed as a breach of trust and confidence as well as misconduct. You could also explain that covert recording may be in breach of data protection legislation. (Remember, though, that recording may be a reasonable adjustment for someone with a physical or mental impairment.)
- During the meeting, check with the employee whether they need to take a break in the same way as you would during an in-person meeting.
- Allow employees time to speak privately to their companion during the meeting.
Can employers use the “special circumstances” defence to a failure to consult about collective redundancies?
This is a difficult and fact-sensitive area, so you should always seek advice on your specific situation.
Section 188(7) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) provides a defence to a failure to collectively consult where there are "special circumstances which render it not reasonably practicable" for the employer to comply with most of its requirements. Importantly, the main exception is that the defence does not apply to an employer failing to allow employee representatives access to the affected employees and appropriate accommodation and facilities to perform their role during whatever process does take place, such as providing them with any necessary technology to take part in an online consultation process and a way to have some kind of meetings with their constituents.
There is no definition of “special circumstances”, but an impending insolvency situation on its own is not sufficient. The case law also indicates that it is difficult to rely on this defence to justify a complete failure to consult except in the most extreme circumstances. If a business has cash to keep it going and is making redundancies to remain profitable (or to make a smaller loss), it will be practicable to consult, even though it may be costly - consultation is regarded as a “cost of business”. Consideration should be given to whether or not there is any available government support for the business which would make it difficult to rely on the special circumstances defence to justify no or short collective consultation. It is therefore important that if employers decide to make collective redundancies, or changes to terms by way of a “fire and rehire” process, they should comply with the collective consultation requirements under TULRCA as best they reasonably practicably can.
The defence may work best if there is a procedural failing, so long as the employer takes what steps it reasonably can. The measures an employer took in the particular circumstances it was facing may also reduce the size of the penalty award for failing to consult, even if it is found to have breached the consultation requirements. The starting point is 90 days’ uncapped pay, with the employer required to show why that amount should be reduced – so taking all practicable steps is very important in reducing what might otherwise be a large penalty.
What immigration issues should we take into account when considering changes to terms and conditions and redundancies?
When you are considering redundancies (or changes such as lay-offs or salary reductions), you should assess whether this has any effect on the immigration status of any of the employees affected. Any of them who holds a skilled worker or temporary worker visa will have reporting requirements that are likely to be triggered, which may then have knock-on implications for whether they can keep their visa or not. Lewis Silkin’s dedicated immigration team can assist you in navigating this part of the process.
Redundancies, restructuring and insolvency
Inflation and other cost increases are causing businesses to consider cuts and changes to their workforce to remain competitive.
Covid 19 - Coronavirus
Our advice on dealing with the impact of coronavirus.