In these challenging economic times, with almost daily reports of businesses ceasing to trade, many employers will be concerned about the future viability of their business. While it is tempting to devote all effort to running the business itself, employers should be aware of the many pitfalls, and also opportunities, provided by employment law, which impact on the business in these difficult periods.
In this newsletter we have set out some practical tips for employers to consider. Our first seminar in the Spring 2009 session will explore these issues further.
1. Ensure your contracts of employment are up to date
It is inevitable that in these times, when margins and finances are tight and pressures are great, there is increased scope for disputes arising between employer and employee in relation to terms and conditions of employment. Employers should ensure that contracts of employment have been signed by all staff, are up to date, accurate, and properly reflect the needs of the business. If contracts are inadequate, employers should look at introducing new contracts of employment (while remembering that new terms of employment for existing staff cannot simply be imposed, and that agreement will be required). It may be helpful for the contract to: make clear that certain benefits are discretionary and can be withdrawn by the employer; to clearly set out entitlements to sick pay, overtime pay, notice entitlement etc. (to avoid any room for argument); and perhaps to give the employer the right to impose short-time working or temporary lay-offs where there is a downturn in business. A properly drafted contract of employment can be an invaluable tool for employers in managing employee expectations and avoiding unnecessary and damaging disagreements.
2. Deal with performance issues
In the current economic climate it is essential that all employees are fulfilling their contractual duties and working for the benefit of the company and its workforce. Employees who are underperforming and not contributing at the required level should be dealt with. Employers are entitled to expect employees to be capable and hardworking, and ultimately it may be legitimate to dismiss employees who are not performing adequately. However, a careful process of performance appraisal, warnings, and performance management will be required before a dismissal could be justified. If poor performance has been tolerated for a long time, there may have to be a fairly lengthy process of dealing with that underperformance.
3. Incentivise performance
Conversely, there may be scope for taking steps to incentivise high standards of performance – bonus schemes, profit related pay, commission for new clients/customers who are introduced by the employee etc. It may seem odd to be suggesting making additional payments to employees when times are tough, but if the availability of such payments can ensure a more meaningful contribution to the success of the business, with employees going the “extra mile” to deliver results, then that may be precisely what is required to ensure the survival or continued viability of the business.
4. Protect your assets
The last thing any employer needs in these trying times is an employee defecting to a competitor, making use of your confidential information and/or poaching customers. It is vital for employers to ensure that they have adequate protection in place, in the contract of employment or a separate contractual document. Misuse of confidential information should be addressed and issues of copyright/ intellectual property dealt with. Carefully-worded restrictive covenants can prohibit former employees from competing with you, soliciting business from your clients, and/or trying to steal your key employees, but much will depend on the seniority of the particular employee, the nature of the role, and the type of restriction the former employer is trying to enforce. These types of clauses should be carefully tailored for the particular individual employee. Unfortunately, it is not "one size fits al"!
5. Avoid costly claims
Defending an employment tribunal claim can be time consuming, very costly and can impose a great burden on a business at a time when the focus should be on the business itself. It is therefore important to avoid unnecessary claims arising and interfering with your ability to run and manage the business. It is worth taking the time to review employment practices and consider where there may be risk areas. Is there a potential equal pay problem? Does this business use a lot of agency staff who stay in place long-term? Are there many fixed-term or part-time workers? Is there a culture of “banter” which could lead to discrimination/ harassment claims? Is there evidence of employees suffering work-related stress or working long hours? Steps to address these problem areas (for example, introducing and implementing an equal opportunities policy to deal with potential harassment issues) may be successful in avoiding tribunal claims arising. bto’s employment law package which focuses on avoiding harassment at work might help in dealing with some of these issues.
6. Alternatives to redundancy
If the business cannot continue with the status quo, consider alternatives to redundancy. For example, a recruitment freeze, reduced hours, overtime ban, temporary lay-offs, reducing salary or benefits. In many cases, these changes cannot be imposed, and a careful process of negotiation may be required. Legal advice should be taken.
7. If downsizing workforce, get it right
There are numerous hurdles for employers who are making staff redundant. There must be: a genuine redundancy situation as defined; proper warning and consultation; proper selection; the employer should properly consider whether there are any alternative vacancies; there may be a requirement to follow the statutory dismissal procedure; arrange a formal termination meeting; and allow an appeal. Collective consultation with elected representatives may be required in large-scale redundancy situations. Selection criteria should be fair and objective, and untainted by discrimination - employers should be wary of relying on absences which may be related to a disability, for example, and even length of service may not be without risk, as this could indirectly discriminate on grounds of age. Any employer who decides to pay more than the statutory minimum redundancy pay would be well advised to make payment conditional on the employee signing a Compromise Agreement discharging potential claims against the employer.
Whilst many regard these times as difficult and employment law a hindrance, it is well worth taking the time to use the opportunity and the legal provisions to ensure that your organisation is well placed to weather the storm.
Contact
David Hoey