05-02-2021

Redundancy in the hospitality sector: what do employers need to consider?

With the country now in its third lockdown, it is clear that the hospitality sector has been hit the hardest and with no sign of hotels, pubs and restaurants reopening soon, employers in this sector will be almost certainly be facing some tough decisions about their staff in the coming weeks and months.

Many employers welcomed the extension of the furlough scheme to the 30th April 2021, but unless a further extension of the job retention scheme is announced soon, it could leave businesses with no option but to let staff go.   Once the support of the furlough scheme does finally end, the cost of those furloughed staff will fall back onto the employer, and therefore major operational changes may become necessary if businesses are to survive.

If you are at the stage where you are considering redundancy, it is important to be clear on your legal obligations as an employer, to prevent causing yourself even more difficulties than you already face.

It does not mean that the process needs to be cumbersome or costly if employers and employees work together in the best interests of the business. In this article, Katie Ash, Head of Employment Law at Banner Jones Solicitors in Sheffield and the East Midlands, share their guidance for how to proceed with what can often be a challenging process.

 

Review your employment contracts

First things first: it is worth carrying out a comprehensive review of all employment contracts. You may wish to consider key clauses such as ‘lay off’ and ‘short time working’ clauses that could help you ease the pressure of reopening by allowing you to temporarily reduce staff hours or asking colleagues to work in a different (less costly) location. Some may ask office based staff to remain working from home for example as a way to reduce costs.

Other potential savings could include reducing or dispensing with overtime; dispensing with discretionary benefits; moving employees to other roles within the business (subject to their agreement); offering early retirement; and putting a freeze on recruitment.

While much of this will be less than ideal – both from your, and your employees’ perspective – it could help to steady the ship, and allow you to making savings that will help the business return to a sustainable position for the longer term.

If however, redundancies do become necessary, it is important to remember that the usual employment law rules do apply, despite the rather unprecedented set of circumstances in which we find ourselves.  Staff are protected from unfair or unjust dismissals by law, and employers who do not carry out proper and full consultations could land themselves in hot water.

 

Make sure your redundancies are justifiable and fair

It is important to clarify that when a business is making a redundancy, it is not the ‘person’ that is being made redundant, but rather the role.

If you are considering redundancies, at the outset, ensure you have a justifiable reason for making a position redundant. Examples may include closing down a department, making cost savings by reducing staff numbers, the closure of the business, or the introduction of new technology that has made the role unnecessary.

You must make sure that you do not discriminate when choosing employees for redundancy. Fair reasons may include performance, or an employee’s disciplinary record. It would be prudent to score employees based on a range of criteria and do note that some reasons are automatically unfair and therefore should not be used.

 

Calculate the cost of redundancies

Once you have identified those at risk, you will also want to ensure that you calculate the cost of the redundancies to the business. Remember, that whilst you will ultimately save on salaries, if an employee has been with you for two years or more, they will be entitled to a statutory redundancy payment in addition to their contractual or statutory notice.

The amount that they receive as a redundancy payment under employment law is based on a calculation including factors such as an employee’s weekly gross pay, age and length of service.

Getting the process right is also key to ensuring that you don’t fall foul of employment law and potentially cost yourself and your business more as a result. If you have reached the point where compulsory redundancies are necessary – be that due to the relocation of the business, a reduction in the work required, or the closure of certain departments or divisions – you are no doubt already under substantial pressure, and it can be easy to make mistakes, which could leave you vulnerable from a legal perspective.

You may wish to consult specialist employment law solicitors like those in the team at Banner Jones before taking action; just to be sure you get it right.

 

Meeting and consulting your employees

With costs considered, you must ‘meet’ with employees if they are at risk of redundancy or have been selected for redundancy. If that individual is shielding and not able to meet in person it does not stop them from taking part in this step of the process, and you must ensure that you look at alternative methods to hold the consultation, including using video call technology or even good old-fashioned pen and paper. During the consultation process, you may consider other alternatives with employees, such as offering a position in a different department (if possible) or reducing their hours of work.

If you are making 20 or more redundancies within a 90-day period, then you will also have to carry out what is known as collective consultation. This places more legal obligations on an employer to carry out certain steps during the redundancy process and it would be prudent to take advice to make sure you get it right, as the penalty for getting it wrong could be up to 13 weeks’ actual pay per employee and a criminal conviction.

 

Letting staff go

The next step is agreeing a leaving date, and to confirm this to your staff in writing, giving the correct notice period under contract or statute, with statutory notice being given as a minimum (this depends on each employee’s length of service).

You should also give dismissed employees the right of appeal. If an employee appeals, you should invite them to attend a further meeting to hear the appeal, and follow it up with a letter to confirm the outcome.

Whatever your process looks like, it is vital that you document every stage of the process.

As we wait to hear whether or not Rishi Sunak will extend the furlough scheme through to the summer, it could be worth making sure that you are clear on the redundancy process just in case you ever need it.

The Banner Jones team are available to answer any employment or redundancy related enquiries at this time, as well as provide advice on employment contracts or restructures. This can all be done remotely via virtual appointments.