Employee Commitments

Managing Your Employee Commitments and Costs

By Matt McDonald
9 Min Read

In a crisis, managing employee commitments and costs is more important than ever, especially when business owners and leaders are having to make some very hard decisions about their staffing levels while managing their cashflows and trying to preserve the values of their businesses.

Now let me stress first of all that, while I have a Masters’ degree in Law I am not a lawyer, and this article does not constitute legal or specific professional advice; however, I have worked for many years in the HR and Recruitment sectors and I’ve led and consulted on quite a few corporate restructures, so my counsel here is based on both hard-won experience and commonly available resources that you can use too.

Know Your Contracts

You may have great employment contracts, or you may have poor ones – either way, you need to refresh your knowledge of what you have formally promised your employees, because they are the primary determinants of your employee commitments and costs.

What do your contracts say about reduced hours of work, or mandating the taking of paid or unpaid leave ? What do they say about “stand down” provisions ? Are your casual employment contracts really permanent contracts in disguise ? And if “worst comes to worst”, what do they say about notices of termination and / or redundancy provisions ?

Beware ambiguous provisions or references to policies that might be out of date. Watch out for contracts that might have been customised for particular roles or employees, or ones that might have predated your current standard contract. If you find a clause that might be problematic, talk to a HR specialist or an employment lawyer.

Remember that Enterprise Bargain Agreements and Industrial Awards are also forms of contracts, with classes of employees, and they may have special conditions that may affect your business’s response to the coronavirus crisis. While you may not have an Enterprise Bargain, remember that all employees are protected by Modern Awards, as a minimum.

Know the Fair Work Act

When considering your employee commitments and costs, remember that you can’t “contract out” of your Fair Work Act obligations (although if you are a small employer, with a headcount of less than 15 people, you may have some relief from the unfair dismissal provisions). The Fair Work Commission has a lot of resources online on topics that are highly relevant to the current crisis, including a dedicated coronavirus information page. Unfortunately this page is still a bit weak about a couple of the most valuable remedies that Australian employers may need to rely on at this difficult time – reducing paid hours of work by mutual agreement, and employee stand down provisions – although they made some timely improvements on 20 March 2020.

Consult Your Employees BEFORE they are Impacted !

Many employers neglect to consult sufficiently with their employees and rush into restructuring, in an effort to reduce employee commitments and costs. Remember that failures to consult in prescribed situations and required ways can lead to breaches of the Fair Work Act, which may lead to penalties being imposed and otherwise sound actions that have been undertaken being invalidated.

Here is an example of some guidance that I provided last week to a great client on how to ask their permanent staff to agree to reduced paid work hours, following the loss of much of their forward orders in recent weeks:

  1. There is a shortage of work due to cancellations beyond your control.
  2. You will need to make changes to protect the commercial interests of the business while respecting staff needs as much as practical.
  3. You are currently considering reducing hours for perms across the board by X by mutual agreement.
  4. You are also considering changing work duties during this period, eg while assessing alternative business models.
  5. It may be necessary to have people working from home or elsewhere at times, depending on operational needs and public health requirements.
  6. You have no plans to make permanent changes at this time but that may change.
  7. You currently plan to monitor developments and reassess the situation in X weeks, when you will consult again.
  8. You will follow up each person individually to hear their views before making a final decision regarding 3 to 5 no later than X.
  9. You ask that the details of this consultation be kept confidential, including from casuals (who you plan to communicate with separately).
  10. You believe in this business and its people and still have every intention of growing it when circumstances once again allow.

In this instance the team were pleased to be consulted and agreed to the requested changes, and my client has “room to move” to explore their other business options.

Stand Downs & Secondments

There is a lot of information that is already publicly available about managing redundancies so I won’t go into detail on that point in this post – hopefully you will not need to invoke those measures. However there are two (often underutilised) tools that stressed employers may consider using, if measures like reducing paid hours are insufficient when managing employee commitments and costs.

First of all, the highly publicised actions of Qantas last work showed that stand downs – where employers cannot give their employees work to do for reasons beyond their control, and require them to take leave without pay – are valid instruments in times like these. In my view, the Fair Work Act is a bit undercooked about the circumstances in which those powers can be used, but its only common sense that if a “natural disaster” is a legally permitted reason, so too is a pandemic that affects how all of us live and work. I’m sure that Qantas took impeccable legal advice before taking such a drastic step, affecting 20,000 employees.

Finally, consider Qantas’s example in also exploring options to ”second” stood down staff to other employers which are actually short of people at this time, eg Woolworths. Remember that there are businesses which are facing huge increases in demand right now, and if you can call on your business networks to give your otherwise unoccupied employable valuable work to do with someone else, isn’t that a win for everybody ?

A Final Word

In a crisis-induced recession there are very few businesses that won’t have to make changes to the way that their people work, or even to their ability to continue in their jobs. Before you take any action to reduce your employee commitments and costs that will affect the livelihoods of your people, make sure that you know exactly what you are doing, communicate often and well, and seek expert advice. You owe that duty of care to both your people and your business.

Matt McDonald

Matt McDonald

Matt has worked as a CFO, Acting CEO, Company Secretary and Head of Sales and HR for 30+ years.

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