Key business decisions in light of Covid-19: Short-time or lay-ff of employees where necessary
Reducing your workforce or reducing hours of work to cut operational costs is something many brokerages may need to consider in order to survive in the unfortunate circumstances we find ourselves in as a result of COVID-19.
The Redundancy Payments Acts 1967 - 2014 provide the statutory basis for both short-time and lay-off under Section 11 and Section 12 respectively. As is always the case with employment related matters the rationale for such decisions must be based on reasonableness and clearly communicated and recorded in order to protect the business against future claims.
Lay-off / Short-Time in practice
How do I go about it?
A lay-off situation arises if an employer is unable to provide the work for an employee which that employee is employed to do.
A short-time situation arises where there is a decrease in the employee’s work so that the employee’s pay is less than 50% of their normal working pay or working hours.
Neither of these measures result in termination of an employee’s employment contract. It is crucial in both circumstances that the employer is of the view that the lay-off or short-time situation will not be permanent. This view must be honestly and reasonably held by the employer, this is essential as it is possible that such action may become the subject of an employment dispute at a later stage and this is the legal test that will be applied.
When selecting employees for lay-off or short-time working an employer should apply the same standard of selection criteria as for redundancy. The criteria applied to such selection should be reasonable, non-discriminatory and applied in a fair and consistent manner.
Prior to putting any employees on short time or lay off you must notify the employee in writing by using Part A of Form RP9 which is readily available online. While there is no minimum notice period provided for under the legislation, an employer must provide notice which is reasonable. It may well be the case that the short notice is permitted considering the extraordinary situation we are currently in.
As touched on above it is essential that you act reasonably and keep employees informed at all stages. If your actions as an employer come under scrutiny at any stage it is essential that you can demonstrate that you acted reasonably in the circumstances and kept employees fully informed.
Do I have to pay employees on lay off / short time?
The next major issue which employers will need to address is the issue of remuneration. An employer may be entitled to lay-off employees without pay in limited circumstances which may be established through a contractual right or an implied right through custom and practice. If your employment contracts do not have a specific provision in relation to pay during periods of lay-off it is necessary to demonstrate that the practice of lay-off without pay was within the knowledge of employees. There is generally a recognition throughout the country that lay-off in exceptional circumstances is without pay, COVID-19 surely constitutes exceptional circumstances. Employees put on short-time should be paid their usual salary taking into account the reduction in working hours.
Redundancy Payment
There seems to be some confusion around how redundancy payment interacts with short-time or lay-off. Here’s what you need to know: -
If an employee is laid-off or kept on short time for 4 or more consecutive weeks or for a series of 6 weeks of which not more than 3 are consecutive within a period of 13 weeks the employee may be entitled to a redundancy payment.
The onus is on the employee to apply for such a payment, the application must be made after the expiry of the above referenced periods or not later than 4 weeks after the end of lay-off or short-time.
In order to apply for redundancy employees must provide written notice to their employer of their intention to claim redundancy under the Redundancy Payments Acts 1967 to 2014, known as a Notice to Claim.
An employer can issue a counter-notice within 7 days of receipt of the Notice to Claim objecting to the redundancy if the employer reasonably expects full employment to recommence within four weeks from receipt of the employee notice and that the employee will not be subject to lay-off or short-time for 13 weeks once work recommences.
In the situation we find ourselves it may be impossible right now to offer any guarantees around future employment, all that you can do as an employer is devise a strategy for your brokerage based on the facts as they stand at the moment and in the interest of the business as a whole into the future.
While putting staff on short-time or lay-off may be difficult if it means that the business survives, and staff can return to work once business improves these difficult decisions should be made. As you are aware the state is offering assistance to individuals during this time, the position as at 23 March 2020 is set out in brief below. Though we understand that the situation is likely to change later this week with the government doing more to assist business during this crisis.
What benefits are employees entitled to if they are laid-off or on short-time?
The Department of Employment Affairs and Social Protection has set up the following schemes to assist employees and employers: -
A rebate scheme has been established for employers who continue to pay employees who would otherwise be laid off because the employer's business has had to cease trading due to COVID-19. The Department will reimburse employers €203 per week for each employee.
A COVID-19 Pandemic Unemployment Payment is available for employees who have been laid-off, this is also currently €203 per week and available for a 6-week period. Workers who are put on short-time can also avail of this payment.
Employees who contract COVID-19 or who are medically advised to self-isolate can avail of the enhanced Illness Benefit for COVID-19 cases which is currently €305 per week.
Employees put on short-time are entitled to claim Short-time Work Support. The payment is made in respect of an employee’s regular salary for the days that they are no longer working. This support is available for a maximum of 234 days and is dependent on the employees’ level of social insurance contributions.
It is vital that you keep up to date with any updates on these payments which need to be factored into your strategy for your business.
Where to start if you have yet to do so…
The overall concern of everyone at the moment is survival. In order to ensure that your business survives this crisis you need to act now. Strategy meetings while observing social distancing guidelines need to be held. Every department in your business needs to carry out a risk analysis and be realistic about the long-term consequences of COVID-19 on their area of business. Once this is done you need to look at the measures that need to be taken to survive. If periods of lay-off or short-time are necessary, you need to implement these measures at the right time for the business.
Review your contracts of employment and policies and see whether there are contractual provisions that provide for short-time or lay-off. The possibility of such measures should be communicated to employees in writing. The obligations set out above regarding notice must be adhered to and employees should be advised about the potential schemes they can apply for.
As an employer you must continually keep employees updated during periods of short-time and lay-off given that their contract of employment is not terminated during this time. While these measures may ultimately end up in a termination and a redundancy situation this is a separate matter for which we would strongly recommend you obtain legal advice on in order to close off the possibility of employment related claims in the future.
For further advice on the issues raised above please contact Anne Marie James at annemarie.james@kmj.ie