MOVING BEYOND THE WAGE SUBSIDY
For many companies, Friday 12 June 2020 will mark the end of the Government 12 Week Wage Subsidy period. Other businesses who were ‘late starters’ on the subsidy will see this come to an end one to two weeks later. Unless you qualify for the extended wage subsidy (maintaining greater than 50% decline in income) the end of the subsidy period will have a significant impact on your business.
For many companies who have undertaken a restructure consultation process with their staff, the end of the wage subsidy period will also mean the termination of staff who are being made redundant. Many of these employees have been provided with longer than contractual notice periods to ensure that the employer was compliant with the obligation not to make an employee redundant during the period to which the subsidy applied. In these cases, those companies will now have the added obligation of paying out all annual leave entitlements. This is a contractual obligation under the Holidays Act 2003 (protected earnings) and cannot be avoided even if the company is experiencing financial stress.
For other businesses, the end of the subsidy period will mean that the company is now entirely responsible for meeting the ongoing costs of the employee’s remuneration going forward. Where the company may still be suffering from reduced revenue this may place significant pressure on the ability of the company to retain all of their employees.
Employers in this position should therefore consider all alternatives available to them prior to proceeding with (further) redundancies.
Available options may include re-negotiating the employee’s terms and conditions to:
- Have them agree to work full time hours for less than full time remuneration i.e. work five (5) days, get paid for four (4). A number of our clients have already successfully implemented this strategy with many employees willing to agree to this ‘salary sacrifice’ in order to retain their roles, support the ongoing recovery of the business and maintain the expectation that full time remuneration will be able to be restored within three (3) to six (6) months.
- Have them agree to work five (5) days for four (4) days’ pay with the fifth day being compensated through the crediting of one (1) additional day of leave to be taken at a later agreed time.
- Have them agree to a reduced minimum guaranteed number of work hours per week with additional hours to be worked, and paid for, on an as required and agreed basis.
- Have staff continue to work on reduced hours while being paid for those reduced hours at their normal rate of pay.
- Have them work reduced hours while taking annual leave to make up their hours. This may be beneficial for the business to reduce their overall annual leave obligations if a staff member is to be made redundant in the near future.
These are examples of some of the options that may be available to you to assist in managing your employees costs as you continue through the next stages of recovery, while seeking to retain as many staff as possible. Other options are also available.
If you are wanting to implement any of these options, it will still be a requirement to record and have the employee’s agreement written within an agreed variation to terms and conditions document. However, with regular reporting in the media regarding the growing number of redundancies and the increase in the number of people applying for the unemployment benefit, we are finding that employees are more open than ever to accept such variations in order to retain their employment.
Please feel free to give us a call if you wish to discuss any post wage subsidy realignment strategies.