The FMD epidemic brings not only disease but a dramatic decrease in revenue both for
farmers and industries connected with the tourism trade and outdoor activities such as cycling. This inevitably leads businesses to look to reduce their outlay costs in order to stay afloat. One outlay is, of course, payroll.
Here we outline various points for employers to consider if they are sadly forced to review requirements for personnel.
What are the options for reducing payroll costs?
In the short term it may benefit both the employer and employee to consider
temporary measures to reduce outlay. Examples of such measures include temporary reduction in the salaries of individual employees or topping/reducing any bonuses which are paid in addition to basic salary.
Alternatively employers could consider laying off staff for a short period allowing the employer to improve cash flow in the immediate future and avoid incurring the costs of dismissing and rehiring.
In the long term employers may be forced permanently to reduce payroll
obligations by making employees redundant.
What does the Law say?
In reality the options for an employer may be limited by both the employees’
terms and conditions of employment and general protection by law.
By law no deduction from a worker’s wage can be made unless either it is permitted by statue or a provision in the contract or the worker has given his prior written consent to the deduction.
Whilst it may seem unlikely that an employee would voluntarily agree to consent to such a measure, if the alternative is termination of the employment there may be room for the employee to negotiate, especially given the fact that, sadly, the likelihood of finding suitable alternative employment within the cycle industry, or locality, may be limited.
Removal of Bonuses/performance payments.
Any benefit which is contractual cannot be removed without being a breach of contract. Even a non contractual bonus received on a regular basis, however, may constitute “wages” so needing the employee’s consent to any non payment or reduction. As above, obtaining the employee’s consent may be possible if the only other alternative is termination of the contract.
Lay off/Short time.
Employees can only be laid off or put on short time where there is an appropriate clause in the contract, or if there is a clearly established practice which allows for such a measure. The term lay off is used where the employee is employed under a contract for work in return for pay but the employer does not offer work and there is, therefore,
no entitlement to pay. An employee is considered to be on short time if during that week he receives less than half a week’s pay.
The law does not allow the employee to be laid off or placed on short time indefinitely without his or her consent. The employee has the right to give notice in writing to his employer of his intention to claim a redundancy payment if the lay off or short time lasts for a continuous period of four or more weeks; or six weeks’ out of thirteen weeks, where not more than three weeks are consecutive.
An employer can issue a counter-notice to the employee’s notice of intention to claim redundancy where it is reasonable to expect that the requirement for the employee to be laid off or put on short time is likely to come to an end within the next four weeks. As with the reduction of wages or the removal of bonuses, if the employment contract does not allow for lay off or short time working it is still open for the employer and employee to come to an agreement, especially where there is a willingness on the side of both parties to avoid redundancy.
Redundancy is a potentially fair reason for dismissal if the employer can show there is no work or there is likely to be no work. In many circumstances, businesses affected by foot and mouth will have a reason to make some or all of their employees redundant as the requirement of the business for the employee to carry out work will have ceased or diminished.
In this context this can be for a temporary period, if it is of sufficient duration.
The obvious disadvantage of having to make an employee redundant is that the employee is permanently lost to the business and therefore all his/her skills and any resources invested in him/her by way of training are also lost. A further consideration is that the law imposes detailed procedures in relation to the consultation and selection of employees for redundancy so that the termination of the contract is considered to be fair. Failing this even if it is a true redundancy, there could still be an unfair dismissal if the right process is not adopted for those with one year’s service or more.
In a worst case scenario, a workplace closure would constitute a redundancy. In most cases an employer's liability in respect of a redundancy dismissal will be fully discharged by the payment of statutory or, where greater,contractual redundancy pay, plus notice in any event. The amount of payment is based upon the employee’s age, length of continuous employment and gross average wage. In order to be entitled to a redundancy payment, an applicant must have been continuously employed for a period of at least two years.
What other issues should be noted?
There other factors which employers, whose business is affected by foot and
mouth, may wish to consider.
At present no financial assistance is being offered to employers for labour costs. However the Government has set up a number of help lines and web sites to deal with enquiries, all of which have been extensively covered on bikebiz.co.uk. The soft loan scheme has also been covered on this site, including an article today.
For those IBDs with more than one shop, an employer could consider re-deploying employees to areas where business is less affected by FMD. Re-deployment can only be achieved where the terms and conditions of the contract of employment allow for such a measure or the employee agrees to the move.
Access to work
It is the duty of every employer to provide his employees with a safe means of access to their place of work. Even where there are restrictions imposed which prevent an employee from accessing the place of work the employer is still obliged to pay wages.
Health and Safety
An individual may assert health and safety as a reason for not coming to work. The legislation is aimed at securing the health, safety and welfare of persons at work. The Department of Health state there has only been one recorded case of FMD in a human being since 1966. Guidance notes from the Government stress that “Foot and Mouth is a highly infectious disease for susceptible animals, but human health is not at risk”. While it
seems unlikely, therefore, that a dismissal will be automatically unfair for
Health and Safety reasons, a tribunal could decide otherwise.
“Whistle blowing” legislation.
“Whistle blowing” legislation protects an employee who has a genuine belief that the employer is breaching a particular Government imposed regulation. This may be particularly relevant to industry affected by FMD given the restrictions and regulations (such as restrictions on access - taking bikes onto banned bridleways, for instance) which have been imposed as a result of the outbreak. Even if the accusation which the employee alleges later turns out to be wrong, the employee will be protected by “Whistle blowing” legislation as long as it was a genuinely held belief and cannot be dismissed if it falls into a category of protected and qualifying disclosures.
None of the above options is attractive, but each may offer a business solution to difficult times. Before taking any step unilaterally employer’s should at least first seek a consensual change. If this is not possible, then an employer should plan a process to avoid claims and throughout embrace consultation - both individually and where required by law collectively with appropriate employee representatives.
Jonathan Exten-Wright is a Partner, and Lisa Harvey is a solicitor, in the Employment Department of law firm DLA.