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Temporary closure of a business – how do you deal with your staff?

A client recently asked how employees should be dealt with where a business is temporarily closed to carry out a refurbishment. Closing a business for refurbishment can be a difficult decision. Whilst you will need to fund the cost of the refurbishment works, those costs will not pay for themselves, especially if you are forced to close for any period. You may also still need to pay your employees – regardless of whether they are actually able to perform any work.

So how do you ensure that your business remains as cost-effective as possible during the refurbishment? We think it is all in the preparation and consultation, although you may still need to make some difficult decisions.

Preparation

Your starting point should always be to review your staff team and their contracts to work out your possible cost exposure and what rights you have.

There is no obligation to provide work to or pay genuine ‘zero hours’ or ‘bank’ staff. That will then leave your bona fide employees. Check their contracts (and they should all have one – it’s the law!) for their contractual weekly hours and pay, as that will allow you to calculate the maximum possible cost of closing for the full refurbishment period.

The contracts will also set out your rights in respect of work location, holidays, ‘short-time working’ and ‘lay-off’. Do you have the right to ask employees to work at a different location or to tell them when to take holidays? Can you send them home or reduce their hours of work? Make a note of the rights you have in respect of each employee.

In addition to the contracts, there are other questions to consider: Can any work be safely performed from the workplace during the refurbishment, is it practicable for employees to safely work from home, has anybody already booked or asked to take holidays or unpaid leave during the planned closure period, can work be increased before and after the closure period to off-set the lack of work during the closure itself, do any employees have less than two years’ service? The answers to these questions could guide your eventual decisions.

Consultation

It will then be time to speak to your employees. Tell them about the closure and your need to keep costs to a minimum and ask for their suggestions. Your employees are likely to be happier if they feel that you are taking their views into account and it will hopefully foster better relations. Find out who is prepared to take unpaid leave and who will work from home. Find out who is prepared to take paid holidays or increase their work before and after the closure period – these will both involve cost but it may be cheaper in the long run.

Remember to clearly record any requests and agreements in writing.

The difficult decisions

Once you have narrowed things down, you will need to decide how to deal with those employees who have not already volunteered to help in some way.

The path of least resistance (and risk) will be to pay everybody their usual pay for the duration of the closure period. You may wish to consider making some form of bonus payment to those who have already somehow volunteered to help. If you can’t afford to do that, then you will need to rely on your contractual and other legal rights:

• Under the Working Time Regulations you have the right to tell an employee when to take their holidays, provided that you comply with certain conditions. The employee’s contract must also not give rise to any conflicts with those rights.

• You might have the right to require your employees to work from another location. That right must still be exercised reasonably and the distance/time involved cannot be too great.

• You might have the right to require your employees to work from their own home, subject to the provision of all necessary equipment and health and safety compliance.

• You might have the right to impose ‘short-time working’ or ‘lay-off’ whether with or without pay. Remember: even if the contract says that you have no obligation to pay your employees, they may have a statutory right to guarantee payments. They could also then have the right to request a statutory redundancy payment under a highly complicated legal procedure!

• Although ultimately less savoury, you might chose to dismiss those employees who have less than two years’ service – perhaps promising them a return to work after the refurbishment.

Clearly, a lot will depend on your plans, your employees and, ultimately, your rights as an employer. However, remember that, without the clear right to do so, you should avoid withholding pay if you want to avoid costly tribunal claims such as claims for unlawful deduction from wages or even for constructive dismissal.

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further