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October 2008: Latest Homes

Question: As a small employer, I am beginning to notice a downturn in work coming into the business and I want to reduce overheads. I have decided to reduce my employee’s hours and so their pay. Am I entitled to do this?

Answer:    Presuming your employees have set hours detailed within their contracts of employment these, and any other terms in the contract, can only be changed if you and your employees agree to the change or if the contract itself contains an express term or some sort of procedure by which the terms can be varied. If your contract does contain an express term allowing you to change the contract terms, then you still need to consult with your employees before making any variations.

Question: I don’t think there is power in the contract to change the terms, but as I am doing this to avoid having to make redundancies surely I am entitled just to write to my employees advising them of their new working hours?

Answer:    No you can’t, to do so would risk an Employment Tribunal case. You can make an offer to your staff setting out the new hours of work (and wage) and the employees will be free to accept your offer, either orally or in writing or by their conduct, although ideally you want their agreement in writing. An employee will accept by way of conduct if they work the new hours. However it is dangerous to rely on acceptance by way of conduct. If you change your employee’s terms of employment unilaterally, they can bring a claim against you for breach of contract and/or unfair dismissal.

Question: What if my employees don’t agree and I have to make redundancies?

Answer:    First of all, I suggest you sit down with your employees (or their representatives) and explain to them that you have a good business reason for wanting to make this change and that you are trying to avoid redundancies. Explain to them how long you expect them to have to work on reduced hours and invite them to ask any questions they have about the potential changes. See if any of them are willing to agree to a change in hours. You could decide to dismiss the employees and re-engage them on the new terms but you need to be sure that you have a good business reason for doing this and that you follow the right procedure. You should be aware that the dismissed employees can bring a claim against you for unfair dismissal, which you should be able to defend if you have followed a fair procedure and acted in accordance with the law at all times. Be aware that dismissing employees in order to re-employ them on new terms must be treated as a redundancy, even if the employees are not left out of work at the end of the day. You must therefore comply with the collective redundancy consultation procedure or risk the payment of a protective award, so you are best advised to consult a Solicitor if you choose to follow this avenue.

Question: Would it just be easier for me to make my current staff redundant and then employ other staff on reduced hours?

Answer:    If you make staff redundant part of the procedure that you must follow to act lawfully involves offering redundant staff any alternative jobs that may exist within the company. If you make employees redundant without doing that and then employ new staff, it is likely that the redundant employees will be successful in a claim for unfair dismissal. You could begin a redundancy procedure by putting all those effected employees into a pool and then applying criteria to those in the pool to decide which roles are redundant and then offer the individuals in those roles any alternative positions within the company. If the only alternate positions in the company are part-time then so be it, you are not obliged to create a job for redundant employees where one does not exist. I would imagine that all of your employees are aware of the “credit crunch” and will probably understand your need to cut overheads, so if you consult with them they may have ideas on how to avoid the redundancies or reduce them in number, some may even volunteer to job share which will cut your overheads whilst still maintaining morale in the business. Consult with them first openly and honestly and consider the outcome of that consultation before you make any further decisions. On a final note you should be aware that the penalties for unfairly dismissing an employee or acting without following a fair procedure are costly, so you would be best advised to seek specific legal advice on your options once you have been through the consultation process and you should also keep a detailed and accurate note of every stage in the procedure as you go.

 

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Sam Dickinson -sd@deanwilson.co.uk

 

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