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Michael Pitt, employment-law partner, comments on the recent high profile cost-cutting measure taken by British Airways and the options available to smaller employers.
Two inquiries I have received in recent weeks sum up the mixed messages we are getting about the state of the economy right now.
One client, who had to make some employees redundant in January, tells me that business has now improved. She wants to know whether she can re-employ any of her redundant staff.
But another client, who believes he has cut everything else to the bone and reducing employee pay is the only way he can now make ends meet, wants to know whether he is allowed by law to do this.
The answer to the first client is easy. She is quite free to re-employ her former workers, and so benefit from their knowledge of her firm’s systems and procedures. I would simply urge her, if she is not intending to re-employ all the people she previously made redundant, to make sure she can justify objectively how she selects the people she takes back.
She should also spell out, in a written contract for each individual that he or she is being taken on as a new employee, since more than four weeks have elapsed since the person was made redundant. This makes clear that none of his or her previous work will count towards continuity of service.
The second client sees cutting the wages of all his employees – and himself as managing director – as a way of avoiding redundancies. He has been watching closely the attempts by the British Airways management to get its pilots and cabin crew to do the same work for less money, following the decision by the airline’s top management to work the month of July for nothing.
Businesses that do not have the option of salary reductions written into their employment contracts can cut wages either if they can get their employees to agree or if they have a sound business reason to need to do so and can show a fair and reasonable procedure in dealing with the situation.
As BA is now discovering, the former can take months of negotiation. The latter may not necessarily take as long but does require diligence in dealing with the process to ensure that the employees are treated as fairly and reasonably as possible given the difficult market conditions. If this process is being considered I would advise employers to take sound legal advice first.
Of course, discussions with employees can open up imaginative alternatives to pay cuts or redundancy. At BA, for example, a number of employees have volunteered to work shorter hours or take a year of unpaid leave. They had long wanted these alternatives, but had been afraid to mention it because they had not wanted to appear to lack commitment to the company.
Meanwhile British Telecom, one of Britain's biggest employers, is proposing that thousands of its employees take up to a year off in return for a 75% pay cut.
Pearson Hinchliffe Commercial Law are able to advise you on employment law matters, especially managing redundancies.
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Michael Pitt |
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