In today’s climate, many employers are looking to cut costs without actually making redundancies. A short-term solution worth considering is the introduction of short-time working. However, while this can be an effective way to make savings without reducing headcount, the implementation of short-time working is not without its difficulties.
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Q What is short-time working?
A This is where an employer reduces the hours the employee is required to work by reducing the number of working days and/or hours the employee works in a day. The employee’s wages are reduced accordingly.
Q Can employers impose short-time working?
A Employers can only impose short-time working where there is a contractual right to do so, for example, in the contract of employment, a collective agreement, or possibly through custom and practice. Flexibility as to how hours are reduced, how long the arrangements can last, who is selected, and so on, may depend on how the contractual provisions are drafted.
Q What if there is no contractual right to impose short-time working?
A The employer should present its proposal to the relevant employees, or their representatives, explaining why it considers that short-time working is necessary with a view to seeking their consent. Many redundancy policies will provide for the employer to consider short-time working before carrying out any compulsory redundancies and this may help in getting employee buy in.
Q How should an employer implement short-time working
A Even when an employer has the right to impose short-time working, if it is not exercised regularly, the situation should be handled sensitively. As employee pay will be reduced, it is sensible to communicate with the workforce and explain the company’s thinking behind the reduction in hours, to encourage employees to be “on side”. If the reduction is to reduce or avoid redundancies, employees are likely to be more amenable to short-time working.
Q What if an employer imposes short-time working unilaterally?
A In these circumstances, the employees could bring a number of claims. These could include claims for unlawful deduction from wages, unfair dismissal, breach of contract, redundancy payments (see below) and protective awards. This is a high-risk approach. Be guided by your knowledge of your own workforce in gauging how they might react.
Q How should employers select employees for short-term working
A If a whole section of the workforce will be affected, selection will be straightforward. If the short-time working pattern requires that you select particular employees, care should be taken to avoid any discriminatory or unfair selection process.
Q Are employees entitled to be paid during short-time working?
A In relation to unworked hours, employees on short-time working may be entitled to:
- payment if there is a contractual entitlement
- a guarantee payment (see below)
- jobseekers allowance.
Consideration should be given as to what happens to other benefits that are calculated with reference to salary and wages paid. For example, in relation to pensions, contributions (under a money purchase scheme) or benefits (under a final salary scheme) these would usually be reduced proportionately.
Q What is a guarantee payment?
A It is a payment which employers are obliged to pay under statute where an employer does not provide work to an employee throughout a whole day during which he would normally be required to work under his employment contract.
The maximum guarantee payment is currently £20.40 per day and is usually limited to five days in any thee-month period (ie, £102).
Q When can employees claim a redundancy payment?
A Imposing short-time working can give employees the right to claim a redundancy payment. The legal provisions governing this are complex, but, in summary, if an employee receives less than half a week’s pay due to short-time working for four weeks in a row or six out of thirteen weeks, with no more than three weeks being consecutive. The employee will be entitled to claim a redundancy payment without actually being made redundant. A claim must be made in writing to the employer who may refuse to pay only if it believes normal working is likely to resume within four weeks.
Q What steps should employers take?
- Check you have a contractual right to impose short-time working?
- Work out proposed new working patterns and selection criteria
- Beware of inadvertently triggering redundancy payments
- Check any contractual entitlement to payment for unworked time
- Communicate constructively with employees.
Huw Cooke, associate, Burges Salmon