Reducing your wage bill in light of the Coronavirus

Due to the huge impact the Coronavirus is having on businesses cash flow I am getting a lot of phone calls from businesses asking advice on how to reduce outgoings around headcount and wage bills.

These are never easy decisions to make, but it is really important to ensure that you do it lawfully and properly to avoid the risk of unfair dismissal, discrimination, breach of contract and unlawful deduction of wages claims.

What options do you have?

1. Lay off or short time working
If you have a lay off or short time working clause within your contracts of employment you can ask your employees to stay at home if there is not enough work.
• A lay-off is if your employees are off work for at least 1 working day.
• Short-time working is when you cut your employees hours.

2. Short term reduction in contracted hours
If you talk to your employees and gain consent then you could agree a temporary reduction in their contractual hours to reduce your wage bill temporarily.
You must gain consent to do this however. A failure to do so may lead to claims for unlawful deduction of wages and breach of contract so this should only be done with explicit consent from your employees to avoid risk.

3. Use of annual leave
You can request that your employees use their annual leave, or a combination of less hours and annual leave within the same week.

4. Termination of employment
Employees with less than two years’ service don’t have the right to claim unfair dismissal and so you can terminate their contract of employment without the need to follow a difficult process. Whilst these employees do not have the right to claim unfair dismissal, there could be other claims that are associated with the dismissal and so I would always recommend seeking advice before you take that step.
You would need to give employees their contractual notice period and they are entitled to be paid for and any accrued outstanding holiday pay.

5. Unpaid leave
If you talk to your employees they may agree to take unpaid leave for a period of time. Do not refuse to pay wages without agreement as this will constitute an unlawful deduction of wages.

6. Redundancies
Redundancy is one of the five fair reasons for dismissal.  Redundancies can be made if there is a downturn in work or a closure of a site.
Only employees with more than two years’ service are entitled to a redundancy payment.
If you do feel that your business needs to make redundancies it is important that you follow the correct redundancy procedures to ensure a fair process has been followed.

Whenever you look to make changes to an employees working conditions it is always best practice to seek advice first.

If you would like support with any of the above, please contact Lisa on 07990 712008 or email lisa@almconsultancy.co.uk.

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