Coronavirus: trade body calls for government-funded temporary staff redundancies

16 Mar 2020 By Siobhan Palmer

But experts say such drastic measures are unlikely to be taken, advising struggling businesses to support employees in other ways during the crisis

UKHospitality has written to chancellor Rishi Sunak, urging him to introduce measures to make it easier for employers to make staff temporarily redundant by funding this through universal credit. 

The industry sits at “the heart of [the] storm” created by coronavirus, UKHospitality CEO Kate Nicholls said. Nicholls said in her letter that the sector was at a “critical stage” as reducing social interactions has resulted in people avoiding settings such as pubs and restaurants, while travel bans have seen hotels negatively affected.

She urged the chancellor to take a range of actions to support the sector, including permitting temporary staff redundancies “where demand falls substantially, with universal credit covering wage costs”.

Temporary redundancies, also known as layoffs, are currently allowed under employment law. However, unless an employer has a layoff clause in their contract, they are required to pay full wages during this period – making such measures inaccessible to many employers. If a worker is laid off for more than six weeks over a 13-week period, a temporary layoff can be considered a full redundancy and eligible employees could claim statutory redundancy pay.

Steve Herbert, head of benefit strategy at Howden, said he doubted such a drastic measure would be adopted. He said it would be a “big jump” for the government to take measures making temporary redundancy more available to firms, noting that such a move would have implications for other situations outside of the coronavirus outbreak.

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Herbert warned that allowing temporary redundancies could hurt companies in the long term, especially if the situation changed quickly and employers needed staff back again. “Once you've made them redundant then they're free agents, and they won't necessarily be able to come back to you,” he said, adding that bringing staff back after a temporary layoff would incur costs too.

Paul Holcroft, associate director at Croner, said employers should avoid temporary layoffs where possible. “To avoid layoffs, employers are highly advised to consider alternatives if employees are to be prevented from coming into work, such as letting staff work from home or agreeing they take a period of annual leave,” he said.

Where a business is forced to make temporary layoffs, can’t afford to pay staff their wages in full and has a clause in contracts allowing them to pay reduced rates, Herbert suggested they could support employees by offering them evidence to show they were not in receipt of full pay and so could not necessarily afford bills at this time. “That gives the employee something concrete to say ‘look, this is not just me saying I can’t pay, this is a company saying we are where we are at the moment, but it will pass once everyone goes back to work’,” he said. 

Separately, a CIPD survey has found that a quarter (23 per cent) of workers who were entitled to statutory sick pay or no sick pay at all would face financial hardship as a result within a week of being absent from work, and a third (33 per cent) would face difficulties within two weeks. 

The CIPD called on the government to extend SSP entitlement to all workers during the coronavirus epidemic, and to increase sick pay to a similar level to the national living wage rate of £294 per week. SSP is currently £94.25 per week.

Ben Willmott, head of public policy at the CIPD, told People Management that this extra obligation to support struggling workers would have to be funded by the government. “You certainly wouldn't want employers to have to take up a further financial burden... the government would need to step in to make up the difference of any uplift to SSP,” he said.

Willmott emphasised that such exceptional circumstances required the government to support employers. He said financial backing from the government would be important to “help [employers] and to minimise the need for them to make redundancies and to protect people's jobs”. 

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