Coronavirus: how can employers avoid redundancies?

People Management explains seven options that businesses struggling financially in the wake of Covid-19 can consider when faced with laying off staff

With industries including travel, hospitality and retail under extreme financial pressure as a result of measures to limit the spread of coronavirus in the UK, many businesses are facing difficult decisions when it comes to the employment of staff.

Further measures to limit the virus’s spread this week included the partial closure of the London Underground network, as well as the closure of most schools in England and Wales from Friday. 

The impact on businesses is already significant. Individuals have been told to avoid bars, clubs and theatres, and many events have been cancelled. Much of the UK’s car production has paused and airlines such as British Airways have advised staff to prepare for layoffs. Chancellor Rishi Sunak had talks with business groups and union leaders on Thursday (19 March) night about the possibility of government subsidies to wages to help employers and staff weather the pandemic.

Some businesses have made it clear they are doing all they can to avoid making staff redundant. Former England footballer Gary Neville took to Twitter to assure his followers that although his two Manchester hotels would be closed to the public from next week, no staff would be made redundant or asked to take unpaid leave.

Employers needed to consider all options available to help them to manage workforce costs and avoid redundancies, said Ben Willmott, head of public policy at the CIPD. For some organisations this would mean considering measures beyond maximising home working and restricting overtime to keep people in jobs, he said.

Director of Epic HR, Gary Cookson, noted that all such measures inevitably came with downsides, and there wouldn’t be a ‘one size fits all’ approach for all businesses, or indeed all staff members. Cookson advised organisations to talk openly to staff about the options, but added that HR “might be surprised by the [positive reaction among staff to] creative responses to the situation, particularly if it is made clear that the business wants to avoid redundancies”.

For all the latest news and advice for people professionals on the Covid-19 outbreak, visit People Management's coronavirus hub

So what are the options businesses might consider to avoid job losses? And what are the pitfalls and legal ramifications to bear in mind?

Redeploy staff to other roles

With many organisations facing a significant drop in business as a result of social distancing measures, many staff may find themselves unable to carry out their jobs in the same way, either because they are not needed or because the nature of their role means they can’t work from home. To work around this, employers can consider offering different duties to those staff that reflect the new needs of the business, said David Harris, managing partner at DPH Legal.

But, Harris added, such measures were subject to employees having the right terms in their contracts. Anything that amounted to a variation in an employee’s contract needed their consent, he said, suggesting that in such cases employers should consult with individuals and come to agreements on a one-to-one basis. “Obtaining consent before you press ahead [is important] because otherwise you're risking a claim arising,” he said.

Redeploy staff to other businesses

There are already some encouraging stories circulating of staff within the hardest hit sectors being redeployed to other now high-demand areas. For example, earlier this week (18 March), it was announced Inverness theatre company Eden Court was to work with its funders, the Highland Council, to find ways for its 200 employees to join the authority’s response to Covid-19.

The theatre was faced with laying off 200 staff, with 75 per cent of its income coming from ticket sales and bar/cafe takings. Details were still under discussion, but potential options included using the engagement team, who already work with children, young people and the community, to collaborate on the delivery of education projects for young people in the Highlands.

There were also rumblings of recruitment platforms being developed to allow businesses with vacancies – such as in the logistics sector for example – to be matched with companies faced with having to let staff go who might possess relevant skills.

Encourage staff to take annual leave

“Another option could be encouraging staff to take annual leave for a period in which the business will struggle the most,” said Paul Holcroft, associate director at Croner. Employers do reserve the right to ask staff to take holiday at a specific time, but they are obliged to provide notice of at least twice the amount of time as the leave you want them to take. 

One eventuality employers might need to ask staff to take annual leave in, much discussed at the moment, is where they are unable to work due to childcare responsibilities in the face of school closures. It may well be that such an individual would need covering at their place of work or their responsibilities covered remotely, presenting a cost challenge for employers paying potentially two sets of wages. People Management and the CIPD’s second survey exploring employers’ responses to coronavirus found 8 per cent of employers said workers looking after children would need to use their annual leave for this.

But this becomes potentially untenable given the long-term nature of school closures – and could be unrealistic where employers are looking for ways to mitigate long-term financial challenges, said Holcroft. “It is currently unknown how long the coronavirus outbreak will last for, and this may not be an efficient long-term solution,” he said.

Reduce hours

One obvious option many employers have already looked at is reducing employees’ hours to share the salary hit fairly and evenly among staff. Martyn Dicker, director of people at Unicef UK, said this was something he’d had to consider in previous similar situations in the past, and something which could work well. 

But Jo Stubbs, global head of product content strategy at XpertHR, warned employers attempting to reduce working hours unilaterally without such powers being written into workers’ employment terms, could amount to a fundamental breach of contract. “In these circumstances, the employee could pursue a claim for an unlawful deduction from wages, breach of contract or constructive dismissal,” she said.

Stubbs advised employers to speak to their staff to gain voluntary consent for any cuts to hours outside of their contracts, and suggested putting any agreement in writing.

Offer unpaid sabbaticals

Dicker said employers might be surprised by the appetite among staff to take up the offer of an unpaid sabbatical of a couple of months. “I’ve been in situations where you’re trying to take costs out for a period,” he said. “Usually you do get a chunk of people saying they’d be up for that.

“I think at the moment our average age [at Unicef UK] is 37, so if we opened up unpaid sabbaticals that would usually be for a young family or to go travelling,” he added, saying that while people might be up for spending more time with their families, if they could afford to do so, the latter wouldn’t be applicable currently, for obvious reasons.

“Usually people will take those to go travelling, and there's nowhere for people to go at the moment – that’s the problem,” he said.

Cut pay or benefits

As a last resort, organisations might consider introducing cuts to pay or benefits, said Willmott. But, he added: “Such drastic changes to terms and conditions would need employee consent. If the alternative though is possible redundancies, employees may be prepared to take a temporary pay cut, particularly if senior leaders lead by example.”

Many companies were already taking these sorts of steps to maintain staffing levels, said Harris. “We're seeing a number of our clients able to agree… reduced salaries for individuals,” he said, noting that companies in retail in particular were being impacted. 

Make temporary layoffs

Employers can temporarily lay off staff, but unless they have specific layoff clauses in their contracts, employees need to be paid their full wages during this time. Employers with layoff clauses would only need to be paid the statutory guarantee pay – currently £29 a day, increasing to £30 a day from 6 April. However, employers without such a clause could consider reaching a voluntary agreement with staff to decrease pay if the alternative is redundancy, said Holcroft.