Advice

Can I make staff redundant because of coronavirus? And how to avoid it

Time 1 year ago

Some dealerships may face having to make staff redundant because of business hardship caused by coronavirus.

With the help of Lawgistics, here at Car Dealer Magazine we answer questions you may have about the toughest of decisions.

During these incredibly difficult times, the help from the government is coming but might not come soon enough. In this ever changing business climate, here’s some of the key pointers you may need to consider now.

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Before you do make cuts, make sure you get as much advice from your HR team and accountants as possible as there are help packages coming to help keep employees in work.

We don’t have too say it, but redundancies at this time really should be the last option.

I’m having to close my business because of coronavirus. Can I make staff redundant?

If you’re planning on closing until the crisis is over then reopening your business once it’s over, this is still a redundancy situation.

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Whether you’re closing a small section of your business or responding to a drop in customer interest and staff reductions are needed, you’re still making jobs redundant, and that requires a financial package for each employee affected.

Lawgistics says that what you must remember is that you’re making the job role redundant, not the individual people. Consider the new packages coming from the government first before making any drastic changes.

How should I decide who to make redundant?

If you’re not making all your staff redundant, there needs to be a selection process. Obviously, if you’re only making one person’s job redundant, the selection process doesn’t need to take place.

You’ll need to make a list of the jobs that will be redundant and put them into a pool so you limit the confusion. Assuming you have a small business and fewer than 20 employees, Lawgistics suggests consulting with employees, selecting the right employees for redundancy depending on your business’s needs, giving them notice, and working out redundancy pay.

But it also says to ensure that you explore all other options before turning to the redundancy option. The legal experts say to follow the guidelines set out by the Advisory, Conciliation and Arbitration Service (Acas), which you can find at acas.org.uk/redundancy

If I make staff redundant, how much should I pay them?

According to the guidelines set out by Acas, employees with two or more years of service are entitled to statutory redundancy pay as follows:

  • Half a week’s pay for each full year of service for employees under 22 years of age
  • One week’s pay for each full year for employees 22 or older but under 41
  • 1.5 week’s pay for each full year for employees who are 41 or older
  • The length of employment is capped at 20 years, while the weekly pay is set to £525. That means the largest redundancy payment is £15,750 – although an employee’s contract may outline a larger payout. Redundancy under £30,000 can’t be taxed.

Can I lay off my staff temporarily?

To lay off staff on a temporary basis, the employee’s contract must have a specific clause on that subject. The government is looking to support workers who may need to be furloughed. Make sure you read the government advice on how this will work before making this choice.

Lawgistics offers the following clause as part of its HR Manager (hrmanager.co.uk) clauses library:

‘The company reserves the right to lay you off or put you on short-time working where this is necessary to meet the needs of the business, for example, if there is a temporary downturn in work.

‘There will be no entitlement for you to be paid by the company for any days not worked during a lay-off or short-time working period but you may qualify for guaranteed pay at the relevant statutory rate. Your continuity of employment will not be affected by a lay-off or short-time working.’

If their contract doesn’t currently include a clause of this nature, the contract may be changed in agreement with the employee. It’s highly advised this is done in writing so that the clause becomes part of the original write-up.

What are staff who are laid off entitled to?

Employees who are laid off may be able to access the statutory guaranteed payment – and they will likely be supported by the chancellor’s plans announced on Friday.

If the employee has been employed continuously for one month, remains available for work, doesn’t refuse any reasonable alternative work and hasn’t been laid off because of industrial action, they are eligible for the statutory guaranteed payment.

The maximum they can receive in these circumstances is £29 per day for five days in any three-month period – meaning a maximum of £145. This is likely to change as part of the government announcements, though. Check the latest guidelines.

If an employee has been laid off or kept on fewer hours for four or more consecutive weeks, or for a total of six or more weeks in a period of six weeks, they may be entitled to claim redundancy pay provided a notice of intention to claim is served on the employer in the manner prescribed by the regulations.

What other alternatives are there?

You may be able to agree with your staff to take a pay cut or take an extended leave of absence – either paid or unpaid.

Whatever you agree with them, it must be written down in writing for both your sake and theirs.

If they aren’t happy with what’s suggested, employment may then be terminated with redeployment on the offered terms. The dismissal will then be subject to the test of reasonableness if the employee brings a claim to the employment tribunal – where the employer may claim ‘some other substantial reason’ as the reason for dismissal. Each case will be fact-sensitive.

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Employers must remember that voluntary redundancy should be offered.

In terms of unpaid parental leave, employees may be entitled to take it. They are allowed up to 18 weeks of leave for each child and adopted child up to their 18th birthday. Each parent is allowed up to four weeks per year for each child unless agreed otherwise. That leave is to be taken in weeks.

MORE: Chancellor unveils huge package of help for car dealers and businesses

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