by Anna Elliott and Paul Killen, Partners at Osborne Clarke

The economic impact of coronavirus on global businesses and supply chains is becoming increasingly stark, with the government calling on workers to implement social-distancing and, where possible, work from home.

However, with measures set to stay in place for at least 12 weeks, if not longer, a strategy for business continuity, minimising workplace costs, supporting employees and managing employee relations is critical. Everyone is keen to avoid full workplace closures and/or compulsory redundancies.

While much will depend on the business, nature of the workplace, roles and workforce demographic, what options should employers be considering?

The Coronavirus Employee Retention Scheme: furlough leave

The government announced last Friday its new Coronavirus Employee Retention Scheme to support employees who would "otherwise be laid off" due to the coronavirus. The scheme provides for an employee in this situation to be placed on furlough leave; they will not be required to undertake any work but their employer will receive a grant for up to 80 per cent of their wage costs up to a maximum of £2,500 per month.

There are a number of aspects of the scheme that need clarification including: who is an employee for these purposes; what elements of pay are wage costs will be funded under the scheme; and the impact on pension contributions and other benefits. During furlough leave an employee is not permitted to carry out any work for their employer. The government has said the scheme will last for three months (back-dated to 1st March), although it may be extended.

Many businesses are looking now at the opportunities this affords them to protect their workers and provide longer term security for their business at this difficult time.

Deferring new starters and introducing a hiring freeze or urgent recruitment

With many businesses forecasting difficult months ahead, employers will need to review their hiring plans and, where employment offers have been made, consider whether it is viable to honour that offer in the circumstances. While difficult conversations will be inevitable, short-term pain for all parties may be the fairer and better solution than recruiting someone into a business at such an uncertain time.

That said, employers will need to consider carefully which staff are crucial over the coming months. A new recruit may have the very skills the business needs to support the business’ immediate needs or those integral to its future success.

For some businesses, demand for services and products is unprecedented and recruiting or reassigning staff a matter of urgency. Thought will need to be given to the duration for which these recruits are required and the terms they are hired on.

Reducing the use of any contingent workforce

By their very nature, contingent workforce staff are essentially a flexible pool of support that many employers may turn to as a source for support as permanent employees self-isolate or become unwell. However, where cost savings need to be made, it may conversely be these arrangements that are reviewed.

Employers should, however, keep in mind the potential reputational fall-out of just cutting off their pool of contingent workers, as well as a possible future need to call on these staff given the changing market conditions.

Requiring employees to take annual leave

In the short-term, employers may be grappling with ensuring enough staff are available to support business continuity with requirements to self-isolate and childcare driving workforce availability.

However, where business does slow down, employers may need to consider requiring employees to take annual leave. Employees would still be entitled to pay during this holiday, but such a move will drive down accrued holiday costs and provide a ready and available workforce once the current crisis passes.

While it is hoped that many employees will be supportive of any requests an employer makes in this respect, employers do have a right in relation to the 5.6 weeks statutory leave to require employees to comply. The notice an employer will need to give an employee to take holiday is twice as long as the holiday period they are being required to take.

Deferring or delaying bonuses and salary increases

With the end of the tax year marking for many businesses the end of the performance review and bonus season, employers should now look carefully at any plans in this respect and in particular any guarantees which have been made. Even where there is no contractual commitment, it will be critical to manage employee expectations on individual rewards carefully to ensure an employee’s continued support and dedication at such a critical time.

Voluntary sabbaticals and career breaks

Employers may also want to look at offering employees the opportunity to take a voluntary unpaid sabbatical or perhaps a more formal career break whereby an employee will resign, but subject to an agreement that should a vacancy arise in their role within a certain timeframe after termination, it will be open for them to return to that role.

To make the option more attractive, it may be agreed that for contractual purposes, when an employee returns, their period of employment before the career break will be treated as continuous with their subsequent employment.

More formal measures to reduce staff costs

Sadly the media is increasingly reporting on businesses needing to take more drastic measures – including pay cuts, reductions in working hours and, ultimately, redundancies. It is hoped that the government's Coronavirus Employee Retention Scheme allowing employees to be placed on furlough leave with 80 per cent of their wage protected will alleviate any immediate need for dismissals due to the coronavirus emergency.

Any reduction in salary or hours will, in the vast majority of cases, require changes to an employee’s terms and conditions of employment. Where this can’t be agreed, an employer can only force through changes through a process of termination and re-engagement on the new terms and conditions. Where 20 or more employees may be dismissed in light of the proposals, statutory collective redundancy rules will apply.

To comply fully with these rules will require consultation with “appropriate representatives” (who may need to be elected) for a minimum of 30 days. Employers may also need to undertake individual consultation. The same considerations will apply where an employer is faced with making redundancies.

While traditionally collective and individual consultation has largely been undertaken face-to-face, employers will need to adapt their processes to reflect what may be a disparate workforce linked through technology.

There are also two formal statutory provisions which deal with “lay-off” (essentially a temporary alternative to redundancy but where an individual is provided with no work and no pay) and “short-time working” (essentially where there is a reduction of work and an employee’s pay is reduced to less than half a “week’s pay” (which is capped at the statutory maximum so would currently be less than £262.50 per week).

These are specific concepts and are dependent on specific contractual rights, usually found in collectively negotiated agreements, although the agreement of employees could be sought now. Employees on lay off or short-time working have a right to receive a small statutory guarantee payment; the amount is currently subject to a maximum of £29 a day (subject to an overall maximum of five days or £145 in any three months).

There is also a right for the employee to resign and claim a statutory redundancy payment after four weeks or more or for more than six weeks in any 13-week period. Many businesses are however now exploring furlough leave under the government's Coronavirus Employee Retention Scheme (see above) and which will in most cases be the more attractive option for employers and employees.