Coronavirus Hub

In light of the current COVID-19 pandemic, we look at what options employers have for reducing employees’ contractual hours.

We are receiving many questions from employers in sectors which are badly affected by the recent COVID-19 outbreak such as hospitality and events, and in particular about an employer’s ability to reduce the contractual hours of their employees or to take other measures to cut costs.

The starting point is always the contract of employment. Some contracts will contain a clause which allows the employer to reduce hours (short-time working) or to suspend employment completely for one or more days (lay off). These types of clauses are not that common as they were traditionally used for those working in areas such as manufacturing where demand could rise and fall.

However, if these clauses are in contracts then an employer can ask an employee to work fewer hours or go home completely, subject to certain rules. The length of time that an employer can apply is indefinite but if it lasts for four weeks in a row, or six weeks in a 13-week period, the employee can apply for redundancy.

How much an employee will get paid depends on what the contract says. If it says no pay, then the employer must pay a ‘guarantee pay’ for days that the employee does no work at all. This is currently £29 a day (increasing to £30 a day from 6 April 2020) for 5 days in any three-month period - so a maximum of £145. If the employee usually earns less than £29 a day, he or she will get their normal daily rate and if the employee works part time, the entitlement is prorated.

However, there are conditions to qualify (whether the employee is full or part time) they:

• must have been employed continuously for one month
• must reasonably make sure they’re available for work and not refuse any reasonable alternative work (including work not in the contract), and
• must not have been laid off because of industrial action

If an employer does not have those clauses in the employment contract, then any reduction in hours or pay imposed on employees will be a breach of contract and so the only way to do this is with agreement. Our experience so far has been that employees recognise the potentially serious situation that their employer is in and have agreed to either a reduction in pay or a reduction in the working week – so that everyone is working four days and has had a reduction in salary to reflect this.

However, if an employer starts these discussions with a view that those who do not agree will be dismissed for redundancy or otherwise then, if this affects 20 or more employees at one establishment, the employer will be caught by the collective consultation rules and:

• have to have representatives elected or consult with a recognised union
• complete and submit an HR1 form to the government (failure to do so being a criminal offence), and
• not dismiss any employee for 30 days

The reason for this is that the definition of ‘redundancy’ in the relevant legislation is very wide and includes any dismissal which is not the fault of the employee.