Reducing farm payroll: lay-offs or redundancy?

Times are tough for UK farmers at present, with high energy prices and the cost-of-living crisis combining with the aftermath of Brexit and the pandemic to force many farming families to tighten their belts.

One obvious way of saving costs is to reduce staffing numbers, with lay-offs, short-time working or redundancy all possible options. Kalpesh Nakeshree Head of Employment Law at Ware & Kay in York, Wetherby & Malton, outlines the legalities and potential pitfalls of these courses of action.

Lay-offs and short-time working

If you need to reduce your staff-count for only a short period, you could consider laying off an employee. This involves asking them to stay home or take unpaid leave until you need them on the workforce again. Alternatively, you can ask your employee to agree to short-time working, which sees them working fewer hours.

You can usually only lay off staff or put them on short-time working if their employment contract allows for this – even if lay-offs are a national agreement for the industry or a collective agreement between you and a trade union.

However, you may be able to lay off an employee or put them on short time working if you can prove that this has been widely accepted in your organisation over a long period, or if you can persuade them to change their employment contract.

If you do not provide an employee with a full day’s work while they would usually be required to work, you must pay them statutory guarantee payments. This is currently a maximum payment of £31 a day for five days in any three months. Part-time workers are paid on a pro-rata basis.

If the lay-off or short-time working runs for four or more weeks in a row, or six or more weeks in a 13-week period (where no more than three are in a row), employees can claim a redundancy payment by giving you advance written notice; however you do not have to pay if they will return to normal working hours within four weeks.

Redundancies

If you need to permanently reduce your headcount, compulsory redundancy may be the answer. This should only be pursued after you have considered all the alternatives such as lay-offs, short-time working, seeking applicants for voluntary redundancy, early retirement or flexible working, not using casual labour, reducing overtime, or filling vacancies elsewhere on the farm with existing employees.

You can only make an employee redundant if you can show that their job will no longer exist. You are obliged to try to find suitable alternative employment on your farm for those you have made redundant, and they have the right to reasonable time off to seek a new job or arrange training.

All employees have the right not to be unfairly selected for redundancy so you must devise a fair selection criterion which can be based on:

• skills, qualifications and aptitude;
• standard of work and/or performance;
• attendance;
• disciplinary record.

Beware of selecting employees based only on their length of service as this could lead to a discrimination claim.

Some selection criteria are automatically unfair, including: anything related to maternity; family-related leave (such as parental or adoption leave); trade union-related activities; any protected characteristic under the Equality Act 2010; or anything related to pay or working hours.

Always consult employees where redundancies are being contemplated. You must abide by the ‘collective consultation’ rules if you are making 20 or more employees redundant within any 90-day period at a single workplace. There are no firm rules for fewer than 20 redundancies, but you should still consult employees, otherwise an employment tribunal may rule that you have dismissed them unfairly.

Once you have completed the redundancy consultations, you need to agree a leaving date and give the redundant employee notice based on how long they have worked for you; or, if the employment contract allows it, make a payment in lieu of notice if you want them to leave immediately.

Redundant staff may also be entitled to statutory redundancy pay if they were an employee working under a contract of employment and have at least two years of continuous service. The amount they are entitled to will depend on how long they have worked for you.

How we can help

Reducing staff levels can be a legal minefield and it is highly advisable to consult a specialist solicitor before you embark on the process. Our team of employment experts can talk you through your options and explain the legal requirements and the dos and don’ts of whichever course of action you opt for, helping to ensure that your stream-lined farming business continues to flourish.

For further information, please contact Kalpesh Nakeshree in the employment team on York 01904 716000, Wetherby 01937 583210 or Malton 01653 692247 or email kalpesh.nakeshree@warekay.co.uk.