How to tell your staff they’re working reduced hours

Diifficult conversation: telling an employee they’re working reduced hours needs careful handling

With the Job Retention Scheme (JRS) coming to an end and the Job Support Scheme (JSS) taking its place, employers wanting to take advantage of the new scheme will need to enter discussions with staff about working reduced hours and cutting pay.

#1 – Review the employment contract

Any change to an employee’s hours of work and pay will amount to a contractual change of their current terms and conditions of employment. Despite the new government scheme being introduced, this does not give a unilateral right to change an employee’s terms and conditions of employment. It is important to review their current terms and any contractual rights to amend terms, on a temporary or permanent basis, before consulting with the employee about the proposed changes.

#2 – Consider whether reduced staff hours are appropriate

Employers should consider whether reduced staff hours are appropriate bearing in mind that the JSS is designed to support “viable” jobs only.  To be eligible for the scheme, an employer must be able to provide at least a third (33 per cent) of the employee’s normal contracted working hours. If this is not possible, then other options may be more appropriate, such as lay off, dismissal or redundancy.

#3 – Discuss any proposed reduced working hours with the employee

If the JSS is appropriate to the business, it is important to then enter discussions with any affected employees regarding the proposed changes to their hours. It should be explained clearly that the employer cannot currently provide 100 per cent of the employee’s contracted hours but that they wish to take advantage of the JSS and keep them on the payroll.

Preferably meetings would be in person but given the current climate, this can be done via video link or telephone, if more appropriate.

It should be explained that the employer proposes reducing the hours of work in line with the JSS and for what period this is likely to be for. The minimum number of hours will be 33 per cent of their normal hours of work and the employee will be paid 100 per cent of their normal salary for the hours they work. It should be explained to the employee that their salary will be topped up to 77 per cent of their normal salary, subject to a cap of £2,100 which will be split between the Employer and Government.

#4- The employee must agree to the working hours change

After the reasons for the reduced working period have been explained, it is very important to seek agreement with the employee in writing to the change, preferably by way of a JSS Agreement. This is so that the employer has a clear record of the discussion and the written agreement recording the changes and any other temporary changes to the contract during the period of reduced hours.

#5 – Implement the reduced hours working and review on a regular basis

Once the reduced working arrangement is in place, it is important that the employer regularly reviews this and considers whether the hours can increase or decrease depending on business demands and in line with the eligibility criteria of the JSS. If considering further changes to the working arrangement, it is important that steps 2 to 4 are again followed before any change occurs.

What happens if the employee does not agree to the changes?

If an employee does not agree to the changes to reduce their hours of work in line with the JSS following the initial meeting at step 2, then the employer will need to engage in a further period of consultation with the employee about the proposed changes. This is likely to include discussing with the employee what the alternatives may be if they do not agree, such as redundancy or lay off.

If the employer is consulting with more than 20 employees, then they may need to engage in a collective consultation process if the employer is proposing to dismiss all 20 should they not agree to the proposed changes.

This collective consultation process would still apply even if the employer is proposing to dismiss them on their current terms and offer reengagement on the new terms with the reduced hours.

What happens if we want to reduce hours outside of the JSS?

If an employer wishes to make a permanent change to reduce hours of work and pay, then they still need to follow the steps above and consult with the employee.

However, if the reduction in hours is separate to the JSS then as an employer you would need to pay fully the employee’s salary on their reduced hours from the date the change takes place.  We would also strongly advise that the employee is issued with a letter implementing the new change which they should sign, or a new contract of employment to record the new terms.

What happens if you get the process wrong?

It is important that a fair process is followed, and the employee is consulted on any proposed changes and any agreements to such changes are recorded in writing. A failure to do so could result in various claims, including but not limited to breach of contract, unlawful deductions from wages, constructive unfair dismissal and unfair dismissal. If more than 20 employees are involved, they could make a claim that the employer has failed to collectively consult.

Helen Watson is a partner and head of employment law at Aaron & Partners