How can leisure and hospitality employers manage staff costs in light of the impact of the new variant of Covid-19? We offer some tips.
Leisure and hospitality employers in England may have been heartened by Boris Johnson maintaining his stance with no further restrictions. But, with Plan B having already led to cancellations, reduced bookings, increased staff absences and public concern about a surge in cases of Covid-19 caused by the Omicron variant, some may already be in the position of having to consider how to best manage staff costs going forward in 2022.
Furthermore, with increased restrictions in other parts of the UK, leisure and hospitality employers are apprehensive that the same restrictions may apply in England in due course.
What steps can leisure and hospitality employers consider now or at least have in mind if need be?
Claim government support
Make sure you claim on the £1 billion support the government has made available to businesses most impacted by Omicron across the UK.
The package is mainly for leisure and hospitality businesses which have experienced cancelled bookings and reduced custom since the implementation of Plan B. Hospitality UK has reported that many businesses have lost 40-60% of their December trade, often their most profitable month.
Hospitality and leisure businesses can apply for one-off grants of up to £6,000 per premises. The Statutory Sick Pay Rebate Scheme (SSPRS) is also being re-introduced to enable small and medium sized employers (with less than 250 employees) to claim reimbursement of Statutory Sick Pay for Covid-related absences of up to two weeks per employee. Employers have been eligible for the sick pay scheme since 21 December 2021 and will be able to make retrospective claims from mid-January.
Furlough has not been reintroduced to cover the wages of staff that cannot work due to Covid-19 and the government seems to have little appetite for this. However, the Chancellor, Rishi Sunak, did not rule out further business support if more restrictions are imposed.
Consider reducing working hours and/or pay
Employers could consider a reduction in employee hours and pay, or asking employees to take a pay cut to reduce staff costs, with a view to returning back to the original compensation when business improves.
Care should be taken with implementing any such changes, which would entail employees being worse off, and compliance is still required with the statutory minimum wage and living wage. Employers are well advised to refer to the latest Acas guidance: ‘Making changes to employment contracts – employer responsibilities’, which advises on steps to take, employer consultation obligations and potential pitfalls.
There are three main options when it comes to reducing hours and pay in a contract of employment:
- An employer may have an express contractual right to reduce pay and hours work, which is known as ‘short time working’. This has its limitations and could lead to a redundancy situation (please see below for further information);
- If there is no express right then an employer can seek consent from its employees, subject to consultation obligations; and
- If consent is not forthcoming then an employer could consider consulting with employees, give notice on current terms and conditions of employment and offer to re-engage on new contractual terms. This is sometimes referred to as ‘fire and rehire’.
See our detailed article here on how to change contracts of employment in order to reduce hours and/or pay.
Deferring pay rises and discretionary bonuses
Employers could consider exercising their discretion to defer or delay non-contractual payments.
If a pay rise or bonus is truly discretionary, has not been agreed or promised to staff then this would not need an employee’s agreement, but nevertheless should be communicated to staff.
Do be aware if your employees have been receiving a similar pay rise or bonus regularly, year on year, they may be able to successfully argue this is in fact a contractual entitlement. So, withholding payment without agreement (or other steps to change a contract of employment – see above) could lead to claims including for breach of contract, unlawful deduction of wages or constructive unfair dismissal.
Freeze on promotions and recruitment
A hold on promotions and recruitment could reduce overheads. Be careful if you have already agreed or promised a pay rise, unless agreed otherwise this could amount to a potential employment claim.
Similarly, if deferring a new recruit, there could already be a contractual obligation to be managed particularly where the new recruit has left a previous job, accepted the job offer, and a date to commence employment has been specified.
Layoffs and short time working
Potential options include laying off employees, which means that the employer provides employees with no work (and no pay) for a period of time while still retaining them as employees.
Or there is short-time working which is providing employees with less work (and less pay) for a period while still retaining them as employees.
Unlike dismissal this is a temporary solution to the problem of no or less work and one that enables an employer to reduce their overheads in response to an unexpected downturn in business.
Please note employees may be entitled to statutory guarantee pay and after a period of time may be able to claim redundancy.
An employer can only impose layoffs or short-time working if they have an express contractual right to do so. The rights of an employee will therefore differ, depending on whether or not their employer has the contractual right to lay them off or put them on short-time working.
You will be in breach of contract if you lay off employees or put them on short-time working without the contractual right to do so. You would potentially be at risk of claims for any losses flowing from that breach, unlawful deductions from wages, constructive dismissal and/or statutory redundancy payments.
However, the absence of a contractual right to lay off or put employees onto short-time working does not mean you have no options. It would still be open to you to seek agreement from your employees to implement what would, in effect, be temporary variations to their contracts.
It is important that employees are given a free choice whether or not to accept such variations but equally, that they understand the circumstances in which you are seeking the variations and the implications of them not being agreed, i.e. that the business may have to make compulsory redundancies. See above for how to achieve changes to contracts of employment and here for our detailed article on layoffs and short-time working.
Employers who do not have the contractual right to lay off or put employees on short time working clauses could potentially amend their contracts of employment to incorporate these terms, after carefully considering if this appropriate in your circumstances. We can advise you on this.
Terminating contracts of staff who are not employees
Where you have staff who are not employees, such as self-employed contractors or workers, you may be able to end their contracts without the same costs (including a statutory redundancy payment) or risk of unfair dismissal, as you would have for an employee.
However, you should be careful as employment status is a hotly litigated issue and disgruntled persons who believe they have been incorrectly labelled as self-employed or a casual worker, may be able to successfully argue they are in fact employees, depending on how they have been treated while working in the business. Bear in mind also that workers have the right to bring whistle-blowing and discrimination claims, if there is a risk of arguing their termination has been tainted in this way.
Requiring staff to take holiday
You could ask staff to take their paid holiday entitlement during a downturn in business. This might not immediately save costs but would enable you to run down this entitlement while paying under-occupied staff. This could prove useful when staff leave your employment as the value of accrued, but untaken holiday you would be obliged to pay would be reduced.
If you are in this situation, then under regulation 15 of the Working Time Regulations 1998 an employer may nominate dates on which an employee must take holiday, provided advance notice is given. The required minimum notice is twice as many days as the number of days’ holiday the employer wishes the employee to take. For example, if you want the worker to take 10 days of paid holiday, you would give them 20 calendar days’ notice. There isn’t a statutory requirement as to the form this notice should take. You could tell all your staff to do so verbally, although it is strongly advisable to confirm this in writing.
Redundancies may prove to be inevitable where there is a serious downturn in business due to Covid-19. This can reduce overheads and you might want to consider staff with under two years of employment (who do not qualify for statutory redundancy payments) in the first instance. Bearing in mind that such staff would still have potential rights to bring other employment claims that do not require a period of qualifying service, such as discrimination and whistle-blowing. So you may nevertheless choose to consult and use a redundancy dismissal process for them, rather than simply putting any procedure to one side.
You might want to consider asking for volunteers for redundancy, where employees voluntarily agree to redundancy (subject to qualifying) would receive a redundancy payment. This could reduce the time spent on a redundancy process and potential disagreement with staff but can also lead to staff you value volunteering and underperforming employees wishing to remain. Although, you would not be automatically obliged to accept those that volunteer as the employees you dismiss by reason of redundancy.
We’ve been supporting and advising employers throughout the Covid-19 pandemic on how to best manage their workforce and reduce costs. Contact us for further information and assistance. We also have a dedicated Leisure and Hospitality team who can provide a full legal service for your business.