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Furlough alternatives can provide the solution to staff cost pressures

Furlough alternatives can provide the solution to staff cost pressures

The introduction of the ability to furlough employees during the COVID-19 pandemic presupposes that a company can put roles on hold and resume them where they left off once the green light is given to re-open.

While it is a positive move to protect jobs, in reality every business has a unique set of circumstances which means furloughing all staff isn't necessarily the best solution for its short and long-term success.

Many SMEs wish to provide limited services to maintain customers and generate some form of income. Alternatively, some operate in a sector where specialist equipment needs maintaining so it can be utilised quickly once the lockdown ends.

Where there is insufficient work to sustain full-time roles, companies could consider furloughing some staff and introducing short-term working for others. This is technically where an employee is asked to work less than half of the usual hours they usually work in a week and is a viable option for businesses who need some employees to carry out limited tasks. 

For other firms who will have to wait some time for things to return to normal, the best option could be to think about the temporary measure of 'lay off' staff. This can be an alternative to redundancy, particularly if staff have skills which the business needs to access quickly. In this scenario, employees would go without pay for at least one week.

To enact short-term working, there must be a clause to allow it within the affected employees' employment contract. Exceptions can be made where there are previous examples of short-time working, or laying off being used within a company as a custom/practice.

This may make it an implied term under employment law. However, in the absence of an express contractual right to short-time working or laying off, the best outcome is to reach a mutual agreement to alter the terms of an employment contract. Otherwise, it could lead to an employee resigning for what they see as a breach of contract and claiming constructive unfair dismissal.

Employees who are subject to lay-off, may be also be entitled to a statutory guaranteed payment. This is limited to a maximum period of up to five 'workless' days in any three-month period. The amount is currently set at £30.00 a day although an employer can choose to pay more. Payments are calculated on a pro-rata basis for part-time employees.

Issues may also arise where employees have been placed on short-time working, laid off or furloughed and then circumstances mean there is no alternative but to make them redundant, entitling them to redundancy pay. If this happens, it is recommended to seek legal advice as they could be eligible to make a claim to an employment tribunal for unfair dismissal.

James Leo, Partner and Head of Employment Law at The Wilkes Partnership Solicitors, comments: "The pandemic means that key decisions about securing and protecting the business are having to be made against what is still an uncertain business backdrop.  

"In circumstances where short-time working or lay-offs are the best alternative to furloughing, it is important to be transparent with staff. Explain the reasons behind decisions and, where necessary, discuss alternatives, including potential redundancies. Before any changes are made to any terms and conditions seek advice from an employment lawyer."

The Wilkes Partnership has launched a COVID-19 resource centre to provide commentary on employment law as well as other areas of legal note that are particularly relevant for businesses in these uncertain times.

It is also offering a no-cost, no-obligation initial consultation to help you understand any issues facing you or your firm so you can map out the best route forward.

To take advantage of this offer call 0121 733 4303.

If you do have any employment law related questions, or a topic you would like to hear about, please contact James Leo - jleo@wilkes.co.uk

In the next blog, we'll consider some key points that businesses should be aware of around commercial contracts that may have come under scrutiny due to COVID-19. Within it, we'll cover what your options are if your customers and/or suppliers are trying to cancel orders, the potential cost implications for your business and what needs to be in place if you're looking to vary existing contracts.

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