Faced with the difficult economic climate many employers are considering cutting employees hours (and as a consequence their pay) to save costs and avoid redundancies. However if employers act without considering the legal implications they could end up before an Employment Tribunal. Alex Payton examines the options open to employers.
- No Contractual Provision
If an employee's contract does not permit the employer to reduce their hours, then any cut could be considered a fundamental breach of contract entitling the employee to resign and claim constructive (and, if they have over a year's service, unfair) dismissal. An employee could also bring an unlawful deduction from wages claim for any short fall in their pay. However faced with redundancy, employees may agree to a reduction in their hours. Provided the employee's consent to that is confirmed in writing, the employer can rely on this to implement such a reduction.
- Express/Implied Provision
The employee's contract may contain an express provision allowing the employer to reduce their hours or to place them on "short time working" (where the employee's weekly hours are less than 50% of their normal working hours). Such provisions can also be found in collective agreements which are sometimes incorporated into the employee's contract. Alternatively there may be an implied right to put employees on short time working, but only where it has been the custom and practice in that business to regularly put employees on short time working over a long period of time, so all employees are aware of the existence and nature of this practice and consider it to form part of their employment contract.
Although an express or implied provision allows the employer to impose a reduction in hours, it is still advisable to consult the workforce to explain why it is necessary and agree regular periods of review. Employees are more likely to accept (rather than challenge) any reduction if the reasons for it have been communicated to them. Agreeing review periods reduces the risk of employees claiming a statutory redundancy payment (which they are entitled to do after four consecutive weeks, or six weeks in any 13 week period, of short time working).
In conclusion employers wishing to temporarily reduce hours should:
- check their employee's contracts of employment
- consult with employees to either explain the reasoning behind the reduction or to obtain their consent to a reduction
- regularly review any periods of short time working to avoid inadvertently triggering redundancy payment claims or to avoid constructive dismissal claims