112. In 3 – No. 2 So you employ staff, what now? Your call…

Fact – you are going to have to, if you have not already done so, make a very rapid decision as to what and how you will communicate with your staff due to Coronavirus.

This Tectona “In 3” looks at what you should consider before talking to your employees.

Introduction

I have spoken to a number of owner managers of businesses who really are finding it difficult to see the way forward.

Normal-times (and these certainly are not normal times) you can assess the extent of the damage with some certainty. For example, when you lose a major customer or experience a bad debt; you know the worst case and can plan accordingly.

The insidious thing about this virus is that no-one has the faintest idea how long it is going to go on for; and so the damage is very difficult to estimate.

The immediate challenge facing business owners right now is what to do with their most crucial and often most expensive resource – their people.

Since the level of ongoing and new business (and therefore your income) is so uncertain you will need to be considering how to reduce your staff costs.

I have been asking round for professional advice for employers and I have summarised the most comprehensive and practical that I have yet seen here. And click here for the source document.

So, In 3:

1. Can I simply reduce the time staff work for me – i.e. lay off or short time working?

Most employers are not going to have express or implied contractual rights to impose lay-offs, even temporarily.  So it will be necessary to do it by agreement, or ultimately take a risk by imposing it on a compulsory basis.  The advice note coves the main risks of doing that.

2. What are your employees’ options if you ask them to accept reduced hours or lay them off?

The overall tone and approach for difficult discussions with staff is going to be critical, but the underlying message in many cases can only be relatively stark – it comes down to a choice for them between:

  • Accepting a lay-off (or reduced hours); or
  • Being at risk of redundancy.

The Coronavirus Job Retention Scheme announced on Friday 20th March 2020 may well make the whole process easier because if an employee is faced with redundancy or staying at home on 80% of their salary for three months then we think they are unlikely to complain too vehemently.

3. What do you need to know before you do anything?

If you are looking at making more than 19 redundancies in the next 90 days you need to implement statutory collective consultation procedures, including (at an early stage) sending a notice to the Secretary of State.  It’s a 30 day consultation period for 20+ employees and 45 days for 100+ employees, i.e. consultation must start no more than 30 (or 45) days before the first termination takes effect.

There can be a “special circumstances” exception to the above periods, which if not available now with Covid-19 it is hard to see when it would be.  However employers would need to be in a situation of imminent insolvency and would still need to show they have taken all reasonably practicable steps to consult.

And the take away nugget – in the light of the Coronavirus Job Retention Scheme announced on Friday 20th March 2020, we think you should wait until the guidance is clear before taking drastic steps.

As ever, proper professional advice is highly recommended! To remind you, click here for the full advice.

You will also need to have very clear idea of how you are going to be affected financially – you should be doing urgent scenario planning. If you are at all unclear as to how to do this, or how to manage your working capital properly, you will need robust and accurate forecasts – meaning not only a profit and loss account, but also a cashflow forecast and balance sheets which all link together.

Tectona can quickly provide this for you by running you through our Quad² Review.

Having identified that you do need funding (and how much), Tectona can help you review the funding options available to you, including help you through the maze of government coronavirus support announced.

Contact the Tectona team so that we can help you work through your options.

About Tectona

Tectona Partnership helps business owners sleep at night by embedding one of our 15 commercial finance directors in your management team. Very often, a part time solution is usually the most effective for small businesses. We make sure you have the necessary management information and strategic insight to make informed decisions and will tell you what you need to know, when you need to know it.

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