Introduction to alternatives to redundancy
We hope that all organisations will come out of lockdown successfully. However, the current economic crisis means that many organisations will face very difficult trading conditions.
Employment costs are one of, if not the, largest cost to your organisation. These costs will have an effect on your financial well-being – and many organisations are now considering how to reduce employment costs. That said, your workforce is also your most important asset and as we get back to business, you will need your workforce to run the organisation, produce your goods, deliver your services and deal with your customers.
As a result, many organisations are facing a very difficult situation – how to reduce or flex the cost of the workforce whilst also maintaining an ability to service customers. This difficulty is enhanced by the uncertainty of when the pandemic will be controlled and the threat of lockdowns end.
Related FAQs
The application has to be made before the date on which the accounts should have been filed, so this process can’t be used if you are already late. If you don’t make the application before your filing deadline, then a fine will automatically be generated if your accounts are filed late. Whilst you could appeal against such a fine on the grounds that the delay was caused by coronavirus issues, this is likely to be a much more time consuming and uncertain process that applying in advance.
It does not appear that the process applies to Confirmation Statements or other returns.
Employers had until 31 July 2020 to make any claims for claim periods up to 30 June 2020. That was the end of the old scheme.
From 1 July 2020, claim periods must start and end within the same calendar month and must be for at least 7 days unless you are claiming for the first few days or the last few days in a month.
You can only claim for a period of fewer than 7 days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it.
For example, if an employee is furloughed for 7 days spanning a month. You can claim the last 3 in one month, and 4 from the next.
The crucial point is that you cannot make claims that cross calendar months.
The first time that you could make a claim for days in July 2020 was 1 July 2020. You could not claim for periods in July 2020 before this point.
There are several options that can be used at this time to try and settle disputes. If it is not possible to settle a dispute via direct discussions between the parties then some form of Alternative Dispute Resolution (“ADR”) might be appropriate. Mediation is the most popular form of ADR. Most people’s perception of mediation is that it needs to be in person but that does not have to be the case.
Mediation can take place online or on the telephone. Most, if not all, ADR providers remain open for business and are quickly changing their business model to ensure that mediations can still take place. Mediation can be arranged at reasonably short notice and certainly so far as the online model is concerned, it mirrors the process that is adopted when parties appear in person. Online mediation allows for joint sessions with the mediator to take place and also for the parties to break out into their respective rooms for private discussions. If a dispute settles at mediation – and the vast majority do – then the agreement reached between the parties is binding and can be enforced.
A group of senior former judges and legal academics have now called for an acceleration in the use of ADR in light of the current circumstances. They have stated that courts should promote “and where appropriate require” the use of ADR. Mediation has particularly seen an increase in growth at this time.
ADR normally results in a quicker outcome than if the matter proceeds in the courts. Due to its conciliatory nature it is a very useful process where parties continue to be in a trading relationship. Contracting parties should also consider building ADR into dispute resolution clauses in their contracts so that in the event there is a dispute the focus is on resolving the dispute as soon as possible before it escalates into litigation.”
The Cabinet Office has published a useful Procurement Policy Note (“PPN”) on relief available to suppliers due to Covid-19 (available here). In brief, you should not be penalised by a public sector body, if, in the current circumstances, you are unable to comply (fully or partly) with your contractual obligations. Public sector bodies are expected to work with suppliers and, if appropriate, provide relief against current contractual terms. This is in order to maintain business and service continuity and avoid claims being accepted for other forms of contractual relief, such as the occurrence of a force majeure event.
The types of relief that may be available to suppliers to the public sector will depend on the existing contracts in place. Some contracts may have a payments by result mechanism, whereas others may be based on certain key performance indicators (KPIs) being met. Other contracts may not include any such mechanisms and therefore it will be a matter for discussion between suppliers and the public sector body.
The PPN provides that, rather than a supplier seeking to invoke a clause that would permit the supplier to suspend performance of its obligations (such as a force majeure clause), public sector bodies should first work with the supplier to amend or vary the contract. Any changes should be limited to the particular circumstances and considered on a case-by-case basis. Changes could include:
- Amending the contract requirements
- Varying timings of deliveries
- Relaxing KPIs or service levels
- Extending time for performance (e.g. revising a contract delivery plan), and/or
- Preventing the public sector from exercising any rights or remedies against the supplier for non-performance (e.g. liquidated damages or termination rights).
These should only be temporary variations and the contract should return to the original terms once the impact of the Covid-19 outbreak on the contract has ended. Discussions with the public sector body about any changes that are agreed should be documented, in a variation signed by both parties.
A public sector may also need to take account of regulation 72 of the Public Contract Regulations 2015, to ensure that any changes to a contract (even of a temporary nature) do not trigger a requirement to conduct a new tender process. Whilst this may be unlikely to be the case with temporary variations, suppliers should still bear this in mind when discussing any changes to a contract with a public sector body.
If you are a supplier to a public sector body and you are currently struggling to meet your contractual obligations, we recommend that you take legal advice as to whether it might be possible to take advantage of the flexible approach that the PPN requires public sector bodies to adopt – it could be that you can avoid service credits or other financial deductions, or the need to serve formal notices such as “force majeure” or other relief notices.
You can claim for regular payments you are obliged to pay staff such as non-discretionary overtime, non-discretionary fees, non-discretionary commission and piece-time payments. Overtime in this context is referred to as ‘past overtime’ in the updated guidance which would suggest that you should use the variable pay calculation (see FAQ above) for those who regularly carry out overtime.