The UK hospitality industry has been hit hard by the Covid-19 pandemic. The recent announcement of about 1,500 staff at hotels managed by LGH in England and Scotland being at risk of redundancy because of the coronavirus crisis is testament to this. It is anticipated that other hotel businesses will follow and restructure their workforces.
But what hotel businesses should remember is that redundancy is not the only option to save workplace costs.
One option is to consider making cost savings by reducing hours and pay for employees. This is possible with employee agreement. If a trade union is recognised for collective bargaining purposes the change may be agreed with the union depending on the terms of any collective agreement. If the option for those who do not agree is redundancy and more than 20 dismissals are proposed over a 90 day period, collective consultation obligations are likely to be triggered.
Another is to reduce pay but require employees to work the same hours. This is much more difficult because employees are less likely to agree without a compelling reason. Businesses should focus on the rationale to gain agreement.
The pandemic is a unique situation which affects every employee differently. Many employees may not want to return to work immediately to meet caring responsibilities or to shield. An unpaid sabbatical or period of unpaid statutory parental leave may be a good option for employees in these situations. The benefit being that employees remain employed but without pay until the business situation improves.
Many staff employed by hotels are currently furloughed. The Coronavirus Job Retention Scheme is planned to end on 31 October 2020. We anticipate that the end of the subsidised furlough scheme is likely to be a trigger for many hotel businesses to consider making redundancies either during or after the end of the furlough period.
Once the decision to make redundancies is made staff that are absent on furlough (or any other reason) must be consulted.
Remote consultation is new for most businesses. Key points are to ensure you can securely and regularly communicate with employees. Many may not have a work email address so obtain an up to date email address, which they access regularly. Make sure employees are given information in good time before any remote consultation meetings that will need to take place online or even on the ‘phone. If using an online portal make sure it is secure and compliant for data protection purposes. Keep good notes of meetings so that there is a record. If employees refuse to engage, keep records of the attempts to consult so that employees cannot allege that they were excluded from the process.
Can you consult during the furlough period? The guidance on furlough does not expressly state that consultation can be carried out during the furlough period or whether consultation falls within the prohibition on doing work. It seems unlikely that consultation is not allowed during furlough, especially as employee representatives are allowed to undertake duties for consultation purposes and consultation is a legal requirement.
If redundancies cannot be avoided, is it unfair to make employees redundant when furlough is available? There is an argument that it is unfair to make employees for whom the furlough scheme is available redundant. The fairness of any redundancy dismissal does depend on all the circumstances available at the time and so this is only one factor. Now that employers have to make a higher contribution towards the wage costs of those on furlough this may be a reason why employers have no option but to consider redundancies.
The rules on calculating a redundancy payment changed on 31 July 2020 for those on furlough. A week’s pay for calculating a redundancy payment is based on the rate of a normal week’s pay rather than the rate they are paid during furlough. The furlough grant cannot be used to pay for an employee’s statutory redundancy payment.
Many employees in the sector are employed on zero hour contracts. Redundancy payments for them are calculated based on the average rate of a week’s pay earned in the last 12 weeks they worked.
Don’t overlook the wellbeing of employees going through this process. The combined effect of the pandemic, lockdown and uncertain financial position serves to increase the stress that employees who are going through this process feel. Ensure that employees are properly supported and are aware that there is a channel through which they can raise questions or discuss concerns.
Taking steps to support employees and follow a proper process is likely not only to reduce claims from disgruntled employees but should also minimise any reputational damage.
By Helen Farr, a partner in the employment team at international law firm Taylor Wessing