Managing through a downturn

In the current economic climate, employers are looking to save money wherever they can. Employers are keen to reduce costs and make the business more efficient and employees’ wages are often the biggest overhead. However wages and working hours cannot be changed arbitrarily. Kim Mack, Employment Solicitor at Fraser Brown, looks at what businesses can and can’t do, and what they should be aware of.

"The worst case scenario is having to make valued employees redundant. Employers often look to find alternatives, such as changing contractual terms, as a way of reducing wages in the short term, retaining good employees so that the business is fit to take advantage of the economic upturn when it comes. However this isn’t necessarily the easiest option."

"Lay off" working is when employees are not provided with work by the employer and the situation is expected to be temporary. When "short time working" is implemented employees are not needed for their usual days or hours.

"In both situations, if changes to an employee’s terms and conditions of employment are imposed by the employer they will be in breach of contract, which may lead to a claim for unfair dismissal and/or unlawful deduction from wages. Certain minimum payments ("guarantee payments") may be payable but employers should be aware that the employee can also ask to be made redundant in this situation. This risk can be minimised by ensuring that if such changes are proposed, a proper consultation process is followed."

"If redundancies are unavoidable employers should always consider asking for volunteers for redundancy. The employer also has an obligation to consider alternative employment (for example a different role) to avoid a redundancy situation."

"Where only some employees are to be made redundant, a consultation process must be followed. Employers must include all relevant employees in the selection "pool", use objective selection criteria, and carry out a consultation process before making employees redundant. Meetings (normally at least two) must be held to give employees the opportunity to put forward any alternative proposals and employees have the right to be accompanied by a work colleague or union representative. If they are dismissed for redundancy, employees have a right of appeal."