We are seeing increasing numbers of businesses being adversely affected by a sharp and immediate downturn in business as a result of Covid-19. If you are also experiencing difficulties you are not alone and that we will strive to help everyone through this difficult time. 

Rishi Sunak’s announcement on 17 March 2020 of a £350bn support package for business, with particular measures for the airline, retail and hospitality sectors. The measures include favourable loan arrangements, business rates holidays and grants. It is important that all businesses struggling in the current climate review the detail of the support offered carefully and seek to take advantage all the financial aid available. 

Beyond that, if your business is being impacted then you need to know what your options are for a) survival – reducing or managing your staff costs going forward and b) business recovery – how and when do you start work to ensure that your business prospers after the current virus crisis subsides?

Survival

The following are options to consider: 

  1. Speak to your employees to explain the situation and to see if they will voluntarily agree to reduce benefits, hours or pay at this difficult time. Often staff will agree temporary measures to get the business through a difficult time. These are changes to their contracts of employment (whether or not the contract is in writing). Make sure you are clear and set out in writing what both parties are agreeing and the timescales for the change. If necessary, the timescales can be extended subject to both parties agreeing.
  2. Check the terms in your employment contracts. Do they allow lay off or short time working? If your contracts do have such terms, and you do reduce your employees’ hours unilaterally, be aware that after either four weeks continuously or six weeks in any 13 week period, your employees may be able to claim redundancy. We will be issuing separate specific guidance very shortly in relation to lay offs and short-time working.
  3. Consider carefully whether it is appropriate to impose a change of terms and conditions on staff. Be aware that terms in your contract saying that you can vary someone’s contract must be exercised reasonably and so this very much limits what it allows an employer to do. It is unlikely that you would be able to rely on such a clause to make the kinds of changes currently being contemplated. This is a complex area which can risk claims for breach of contract, unlawful deductions from wages or constructive unfair dismissal and may require collective consultation, so take legal advice if you wish to do this.
  4. If you have made job offers to new staff who have not yet started, consider whether it is appropriate to withdraw these. If the job has been accepted this could be a breach of contract which could mean you owe the employee for any loss they have suffered as a result. This could be equivalent to the notice period. Again it is best to consider if you can defer a start date and discuss the situation with the new person before just pulling the plug on new roles.
  5. Freeze pay rises and promotions for a temporary period.
  6. Ask your staff if they would be prepared to take a sabbatical, annual leave or a period of unpaid leave. This may be less attractive to people at this time when they cannot or don’t want to travel.
  7. Consider diversification. Is there other profitable work your employees can do for which they have the skill set, enthusiasm and equipment?
  8. Carry out a lawful and compliant redundancy process ensuring that appropriate pools for redundancy are created. In order to ensure you are able to recover in the long term you will ideally reduce numbers of employees in areas where you are confident you could replace them when business levels return to usual, unless you are able to identify roles which you can permanently live without.

The Recovery Plan

At some stage the crisis will pass. Your business will need to start thinking about the bounceback. You will want to be able to take advantage of increases in demand or alternatively the changed business landscape once the virus is under control. Some competitors may not survive or be as healthy as your business. To plan ahead for that recovery stage, look to:

  • Retain your best staff.
  • If they are on reduced hours or no hours, keep in touch with them and share positive messages wherever possible.
  • Establish a WhatsApp group or similar communication means and communicate as openly as possible and provide information and business updates.
  • Respond to questions and in a timely and honest way so that where possible uncertainty is eliminated.
  • Ensure that those that remain loyal and supportive to the business know that they will be appropriately rewarded in due course.
  • Consider a one off bonus scheme linked to productivity and profit for the period after the crisis.
  • Provide those whom you continue to pay during reduced working periods with work, leads and whatever they reasonably need so that they can keep the business ticking over.
  • Redeploy staff if their contracts allow or they consent, to work areas which are continuing or for which there is demand.
  • Use the time to train or second staff to areas of the business where they are needed.

This is an unprecedented situation and there is a lot of economic fear for both individuals and businesses. The decisions employers make in terms with dealing with Covid-19 might have a long term impact on your employee relations, as individuals are looking to both the Government and their employers to be as supportive as possible. The needs of the business will of course be a factor but where possible limiting the impact on your employees will build in goodwill for the future.

We will be continuing to share updates as the situation around COVID-19 evolves. You can find the contingency plans that we have put in place, along with further advice, here.