How To Flex Your Workforce in an Economic Downturn
Brexit is said to have left the UK economy on a knife edge, and with speculation of an economic downturn also on the horizon employers will be considering the future of their organisations and how best to mitigate risk across the board.
But when it comes to people, how can an employer “flex” its workforce to try to avoid or limit compulsory redundancies, and what are the legal pitfalls? Andrew Secker, Principle Consultant at Mills & Reeve, explains for Total Business.
Flexing employment terms
One of the strategies employers could adopt is to explore if terms and conditions could be flexed by, for example introducing annualised hours, shorter working weeks or home working (thus saving overhead costs). For many, the working day already isn’t strictly 9-5, and technology and culture means that employees can now work from almost anywhere in the world, rather than be constrained by a regimented office presence.
Such changes are only effective if employees agree them, of course. But given the demand for flexibility and work life balance, a creative proposal could be more attractive to workers than, say, reductions in pay without a reduction in hours.
For employers concerned that, post-Brexit, it will be harder to recruit talent or fill skill shortages, this approach would help retain staff and reduce recruitment costs.
That said care needs to be taken.
- Firstly, employers should check if the change indirectly discriminates against employees who share one of the nine characteristics protected by our equality legislation, which covers age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. If it does, an employer will need to be satisfied it can objectively justify the change.
- Secondly, such proposals can trigger collective consultation where the change is fundamental (so akin to a dismissal of one contract, the start of a new one) and results in the dismissal of 20 or more employees in one establishment in any period of 90 days or less. For multi-site employers, each site is usually an establishment but there are some exceptions.
- Thirdly, an employer will have to decide whether to dismiss (on notice) and offer to re-employ those employees who do not agree the change, taking into account the prospect of unfair dismissal claims from those with two years’ continuous service or more.
Secondments and Sabbaticals
Another useful tactic that many organisations adopt is internal secondments into vacant roles and unpaid sabbaticals. These can work well when an employer needs to retain key talent and where any decrease in workload is expected to be temporary.
Each requires thought as to how, and to whom, this could be offered, bearing in mind the future effects of any downturn including possible redundancies of those who may have applied for a secondment or sabbatical (had they known redundancies could arise).
The terms of sabbaticals or secondments must also be set out in writing to avoid future disputes, for example, about the employee’s right to return to their former position and the impact on pay and bonus.
Short Term Working and Lay Off
Short time working and lay off could help if there is a temporary shortage of work, which could arise if Brexit delays projects or the supply of goods and products.
Short time working allows employers to cut working hours temporarily in these circumstances. Lay off allows employers to place employees on unpaid leave when there is a work shortage. Whilst this is an attractive option, employers must have reserved a right in the terms and conditions of employment of affected employees in order to implement these options.
Both are short term solutions. If employees have five “workless” days in three months, they may be entitled to statutory guarantee payments. And if an employee with two years’ or more continuous service is laid off or kept on short time working for four or more consecutive weeks, (or for a total of six weeks over a thirteen week period), they can claim a statutory redundancy payment.
If there are peaks and troughs in work, employers could consider using agency workers rather than continuing to hire employees directly.
Since agency workers are engaged by a third party, there is usually limited legal risk for an employer in using this type of labour.
Voluntary Exit Schemes
Schemes offering enhanced terms to leave (subject to a right of refusal) were deployed in the last recession as a way to reduce the workforce without the cost and risk of formal redundancy consultation.
When adopting these schemes it is important to note that voluntary redundancies count as a redundancy dismissal by an employer – and so count for collective consultation purposes.
Moreover, these schemes do not guarantee legal risk is eliminated. HM Land Registry successfully defended claims of indirect age and sex discrimination brought by employees whose applications for voluntary redundancy were refused.
While the outlook continues to remain uncertain there are definitely a number of options that can be considered when it comes to retaining talent and flexing the workforce. There does not need to be an immediate default to redundancy. With the many threats out there also come opportunities, and now is as good a time as any for employers to consider their team structure and introduce new ways of working to be able to adapt and thrive in the event of economic downturn post-Brexit.