Financial need to reduce staff hours

We are in debt and finding it hard to pay suppliers. If we reduce the hours of our 15 employees to cut costs, what are the legal considerations?

You haven’t specified whether it is a permanent change to working hours that you wish to make, or simply a temporary measure to see you through until the next job comes in.

If it is the latter, and the reduction of hours meets certain conditions, this is known as “short-time” working and you must ensure that your employees’ contracts of employment allow for this. In this circumstance, your employees may be eligible for Statutory Guarantee Pay.

You will have more options if it is a permanent change to your employees’ working hours that you wish to implement. Check your employees’ contracts to see if they include a clause which states that you may reduce their hours.

If your contracts do not allow for a reduction, you cannot simply decide to vary your employees’ working hours as this will constitute a unilateral change to the terms and conditions of their employment. This may leave you facing a tribunal claim for breach of contract.

Because you only have 15 employees, the collective consultation provisions do not apply but you must still hold a period of individual consultation with your staff in which you set out your proposals, in respect of which you invite their suggestions within a set time period.

Give any alternative suggestions made by your employees serious consideration. They may see that the reduction in hours is an alternative to redundancies, and accept them. If, after consultation, it is still necessary to reduce hours and some employees cannot or will not fit in with the new structure, then depending on the exact circumstances, dismissal of their current employment contract may have to be considered. This should be together with a simultaneous offer of new employment under your new working hours structure.

Related Topics

Employment Contracts

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