With offshore companies in the North Sea already reporting substantial cutbacks in staffing, employers should carefully consider all of their options for contractual and temporary solutions to see them through the crisis, as employment solicitor Paida Dube explains.
The coronavirus crisis is forcing employers of all sizes across the UK economy to make drastic changes to their workforces.
As the UK lockdown continues and with no understanding of how long the impact of the crisis will be felt in the industry, oil and gas companies are having to turn to critical measures in response to these unprecedented circumstances, including layoffs, furloughing workers and making redundancies.
Lay offs & short time working
Laying off means providing workers with no work and no pay for a period whilst retaining them as employees. Laid off employees would be eligible for a small Guarantee Payment, limited to a maximum of £145 over three months.
Short-time working applies where an employee is given less work for a period and with less pay.
Lay-offs and short-time working offer employers some financial breathing space, but they can only be implemented where there are express clauses in their contracts of employment, or if their employees have consented to the measures. In which case, workers may only agree where the alternative is redundancy.
Furloughing workers & the Coronavirus Job Retention Scheme
Under the new Coronavirus Job Retention Scheme, the Government is offering UK employers financial support to pay the wages of workers who would otherwise have been laid off or made unemployed through redundancy because of the Coronavirus outbreak.
The scheme will be available to all UK employers with a PAYE scheme in place on 28 February 2020, regardless of sector or size.
To qualify, workers must have been designated as ‘furloughed’. Furloughed workers are those who have been asked to stop working due to a lack of available work. They remain on the employer’s payroll but cannot do any work for the employer that has furloughed them.
The scheme will see HMRC reimburse 80% of furloughed workers’ wages, up to a limit of £2,500 per worker per month, plus (not including) the associated employer National Insurance and minimum auto enrolment pension contributions on that wage. Note that fees, commissions and bonuses are not included.
Employers can then choose to top-up the HMRC payment. Any decision by an employer not to provide the additional 20% will be subject to the usual employment rules and may require renegotiation of contractual entitlements.
Eligible employees must have been on the payroll on 28 February 2020. If a worker was on the payroll on 28 February but has since been made redundant, they can be re-employed and put on the scheme.
For employees whose working hours and pay vary, the employer can claim for either the same month’s earning from the previous year (eg March 2019) or the employee’s average monthly earnings in the 2019-20 tax year, whichever is the higher amount.
The Government has clarified that furlough leave must be taken in minimum blocks of three weeks to qualify for the scheme. Employers can only claim once every three weeks, ie they cannot get weekly reimbursement.
Employees off work and in receipt of sick pay or who are self-isolating cannot be furloughed, but can be furloughed afterwards.
The scheme is expected to go live in late April, with employers notifying HMRC through a new online portal. Payments will be backdated to 1 March 2020 and run for three months from that date.
Furloughed workers must have been advised of their change in status to qualify for the scheme.
If the employee’s pay is to remain consistent, even though it is being funded by HMRC, their consent may not necessarily be required for them to be designated as furloughed.
However, employers should proceed with caution and take advice on the specific circumstances. For example, if an employee has an implied contractual right to be provided with work, the employer could not impose furlough even where there will be full pay.
If the employer is proposing to reduce furloughed workers’ pay, they should first check their contracts of employment. If the contract permits a reduction or even cessation of pay where there is no work, then employee consent would not be needed.
Where there is no such contractual provision, the employer would need each affected employee’s consent. Failure to get written consent or contractual agreement in this instance could be deemed an unlawful deduction from wages.
Furloughed workers can still be made redundant during the furlough period or immediately after, and there is no requirement to bring the employee back to work after the period of furlough. If an employee is made redundant during the period of furlough then grant payments will cease.
Redundancy may remain the only option for businesses facing severe financial issues or cessation of work.
Regardless of the time and financial pressures facing employers, the law is clear that employees must be treated fairly through a lawful redundancy procedure, which includes giving the relevant notice period and consulting staff before a final decision is reached, or if negotiating a settlement agreement.
Failure to meet these legal responsibilities can lead to costly tribunal claims and damage to reputation.
As employers navigate the challenges of the coronavirus, it is important to remember that existing employment laws continue to apply and any changes to workers’ status or employment contracts should be handled with full consideration of their rights while managing legal risks for your business.
Paida Dube is an employment law solicitor at DavidsonMorris, with specialist experience in helping employers meet workforce management issues, redundancies, settlement agreements and defending unfair dismissal tribunal claims.