With rising energy costs hitting businesses hard, particularly in the hospitality sector, many employers may consider reducing employees’ hours. Catriona Aldridge and Jenni Darling look at the legal implications.
As the impact of increased energy costs is becoming a reality, many businesses in the hospitality sector are being forced to consider reduced trading hours as a way of ensuring they can continue to trade.
A survey carried out earlier this year by several trade bodies, including UK Hospitality and the British Institute of Innkeeping, indicated that 38% of businesses surveyed had already cut their trading hours.
Reducing hours not only has an impact on customers but has implications for staff too. What measures should hospitality employers be considering in order to retain their talent?
This question is especially acute in a climate where it was already extremely challenging to attract and keep their best people in the industry. Another priority will be to avoid costly employment related claims.
Reducing trading hours will inevitably result in reduced hours for staff. For those with contractual hours, getting staff agreement to varying hours and days of work is the safest route.
Approaching the matter in a collaborative manner should also help retain employee loyalty, which is essential for the days the business is open and trading. While we must recognise that many employees will be reluctant to accept any associated reduction in pay, a reduction in hours is not always a negative. Employers could seek to promote the work-life benefits of a shorter working week.
Where a fully collaborative approach is unrealistic, employers should consider what flexibility they already have within their employment contracts to flex hours.
We are aware of several employers within the sector who used the pandemic as an opportunity to revisit job descriptions and widen role remits. This may enable employers to redistribute the workforce in a way that better fits with a reduced working week.
Holidays are another lever at an employer’s disposal. Employers can require employees to take holidays at specific periods.
This will work best for employers looking to reduce trading hours over the winter months, for example, but this tactic is of course limited to the number of holidays the employee has remaining.
Clearly for some employers more drastic measures will be required. While many in the industry have been seeking to move away from employing staff on zero hours contracts due to the instability that creates for the workforce, for those continuing to operate on this basis it will be possible to offer fewer (or no) hours to staff.
Risk of potential claims
However, for employees on contracts of employment with fixed hours of work, simply reducing these employees’ hours of work without their consent would leave the business open to potential claims – including claims for unlawful deduction of wages and unfair dismissal.
Ultimately, if employers cannot gain consent to changes, they may wish to consider a dismissal and re-engagement exercise, bearing in mind that if this involves more than 20 employees the statutory obligations to collectively consult are triggered.
Failure to collectively consult in such circumstances can result in protective awards of up to 13 weeks per employee, which could undermine the cost savings the employer is seeking to achieve.
Another option an employer could consider is whether the statutory scheme of lay-off or short-term working could apply. Generally, laying off employees or moving to short-time working are short-term solutions in an attempt to avoid redundancies -both options got a lot of air time at the start of the pandemic.
There is also the benefit for employees of claiming a statutory guarantee payment if they are laid off (although this is limited to five days in any three-month period).
This option is very much limited by the fact that in order to implement such a scheme lawfully there must be a contractual right to do so.
Redundancies remain an option but carrying out redundancies in a fair manner is costly and time consuming.
For example, employers will need to consider whether there is a genuine redundancy situation (meaning there a reduced requirement for employees to carry out a role of a particular kind), and consult with the employees in respect of any proposal to dismiss.
The obligation to collectively consult would also be triggered if the employer is proposing to dismiss more than twenty employees. Equally, making redundancies does not ensure that the business retains staff for the times when they are needed.
Employers should be proactively considering how they are going to resource their business over the winter months.”
Informing these options is the fact that employers will need to action them in a way that is non-discriminatory. The employer should not be taking into account any protected characteristics, such as sex, pregnancy, disability, sexual orientation, race or religion in the decision-making process.
They must also ensure that they are not inadvertently and indirectly discriminating by disadvantaging one group over another. With hospitality businesses having to fight so hard to secure staff over the last year or so, the negative impact of any such discrimination could be devastating from a reputational perspective as well as costly to defend if claims are raised.
There is a lot to think about. Employers should be proactively considering how they are going to resource their business over the winter months. They will need to consider what is best for their business while ensuring they comply with their legal obligations towards employees.
Given the challenges the hospitality sector is already facing, it will be those businesses which handle them most effectively and sensitively who will have a workforce best prepared for when things start to look up.