BMW propose to lay off employees for two weeks, without pay, in the event of a no deal Brexit. Is it something you should consider?
Many employees have mortgages and other commitments so a lay off for two weeks without pay is bad news, let alone six weeks which, in some cases, the law effectively allows.
Should you consider a lay off?
Because so many employees have regular commitments, better recruits will shy away from jobs with lay-off clauses in them. For this reason, we discourage inclusion of such clauses in contracts of employment although it is, of course, a choice for any client. Even it you have a clause, the operation of lay-offs requires care and understanding of when lay-offs can and cannot be used.
What if I do not have a lay off clause in the contract?
Most probably that would be a breach of contract. If so, then employees would be entitled to claim that you have dismissed them. One or more employees might do this and fighting such claims may not be worthwhile.
If lay-offs are common in your sector, or if you have done lay-offs in the past with impunity, the risk could be different. Simply tread carefully!
One option would be to provide your employees with a new contract that includes such a clause. But employees are entitled to notice. That would be one week for every year of service. With the clock running to 31st October time is running out.
There are other possible options, see below.
I do have a lay off clause
That is a good start!
However, there are technical aspects as to when it can be applied. There is also guaranteed pay which you will have to meet.
Furthermore, if the lay-off runs for more than six weeks, then employees are entitled to claim redundancy. That could well cost more than six week’s pay for any employee with more than a few year’s service.
Other possible options:
This was an option chosen by BMW earlier when Brexit was forecast for the 31st March. This time their employees have run out of holiday entitlement. Your employees might have run out too. Holiday is an entitlement, so you cannot necessarily insist that it be taken.
Voluntary pay reduction or voluntary lay-off
If either can be formally agreed, then it is an option. Against a backdrop of a possible lay-off, or especially possible collapse of the organisation, then this might be achievable. Usually there is a commitment to resume normal pay when possible or even pay back the shortfall over time.
Laying-off employees is problematic and is best regarded as a last resort.
Malcolm Martin FCIPD
Author Human Resource Practice