No Deal – no pay?

The Government’s recent decision to publish a series of papers outlining what organisations should do in the event of a “no deal” Brexit has attracted a good deal of publicity and comment. But one that didn’t get much media attention was on “Workplace rights”.

The reason it didn’t is that there will be almost no change to employment law as a result of the UK leaving the European Union. Existing EU laws and regulations are now all incorporated into UK law (if they weren’t already) as a result of the EU Withdrawal Act 2018.

The only two slight changes – which will only affect a very small number of employers and employees – are that if there is no deal, UK based workers will no longer have the right to request that their employer sets up a European Works Council (something which only applies if the employer operates in two or more EU countries); and that UK employees who work in an EU country will no longer be protected by the EU’s Insolvency Directive if their employer becomes insolvent.

However, one area of employment law that may become important in the event of “No Deal” – particularly if there are problems in certain sectors – is the right to lay off staff temporarily. As an employer, you can request staff not to attend work at any point, but you can only do so without paying them* if you have an explicit clause in your employment contract.

Only a minority of companies include such a clause these days, since they are rarely if ever needed, and also because those that do have fluctuating demands tend to use “zero hour” contracts or other types of contingent arrangement.

But consider this scenario. Your company makes machines. Currently, you use widgets manufactured in Germany and imported by truck. In the event of a No Deal Brexit, widget imports are delayed, perhaps for a matter of weeks, while new customs arrangements are resolved. You’ve got nothing for your workforce to do but without a lay off clause you’ll need to continue paying them. Could your business survive?

So, you may want to change your employment contracts to incorporate an appropriately worded clause – contact us if you wish to do this.

But before you do, think about these three points

  • Changing contracts – even by agreement – is a time-consuming process.
  • If some or all of your staff won’t accept the change, do you really want to go through the whole process of dismissing them and re-engaging them for something that might not happen?
  • Even if staff do accept the change, it’s likely to affect their morale and commitment. Do the benefits of a lay-off clause outweigh the possible loss of productivity, increased absence or higher turnover?

The right to impose an unpaid lay-off may be a necessary step for your business – but think about it holistically, not simply financially.

(*you may have to pay a small “guarantee payment” for the first 5 days of any lay-off period)

All the World’s a Stage

There seem to be a lot of HR related blogs on authenticity at the moment. The concept of “bringing your true self to work” has gained a lot of traction for what are very understandable reasons. If we are looking to improve productivity and get the best from committed and motivated employees, then we need to counter the “reverse superman” effect (a phrase coined by Organisational Development specialist Ali Germain) where people who are talented, capable and innovative in their non-work lives suddenly turn into lifeless corporate drones as soon as they clock in. And creating more human, people centred workplaces may well be the way to attract people to work for our businesses in future.
However, I’m not convinced we actually want real authenticity. Let me give you two examples.
Many years ago, I worked with a senior manager whose life was dominated by his hobby of yachting. His office was full of yachting memorabilia, including a sailing cap he always kept on his desk. People used to hate being summoned to his office because, after 5 minutes of business, they would be subjected to interminable (and to non-sailing types, i.e. most staff) tedious anecdotes about his yacht, sailing generally or his days in the navy. He was being totally “authentic” but the real him was a dreadful bore.
More recently, I had to deal with a disciplinary situation where an employee was constantly rude and aggressive to colleagues, but never in front of her manager. Following a particular incident, she was suspended and ultimately dismissed. During the investigation, many people commented that it was good that management had now seen her true colours. In her hearing, she argued that she had done nothing that wasn’t warranted and that she had always been like that – even using the phrase “what you see is what you get”.
But even if we want to get the “real person” in work I very much doubt we will. There have been numerous psychological studies about how people modify their behaviour in different environments – as Shakespeare put it “one man in his time plays many parts”. It’s one of the HR clichés that you don’t have to be friends the people you work with – and if you aren’t, you probably won’t be comfortable with showing your real feelings or personality in the working environment – no matter how much you like your organisation, job or get on with colleagues at a superficial or professional level.
When we talk about authenticity in HR, what I suspect we really mean is that we’d quite like people to show some of the nicer aspects of their personality in work, maybe with the odd idiosyncrasy thrown in, not their misogynistic or racist views or even their tendency to drone on about their yachting exploits at the weekend.

What if all Employment Law were abolished?

I’m sometimes told that business life would be much easier if “employment laws were abolished”. But would that be the case? I’ve worked in an industry in which all regulation was abolished and the consequences for business were mixed, to say the least.

In late 1986, the bus industry outside London was completely deregulated. Prior to this, buses were controlled and run by the public sector, and operated as localised monopolies. Routes, fares and all other aspects were set by local authorities or other similar regulatory bodies, the industry was heavily unionised with various national and local agreements governing terms and conditions. Unprofitable routes could be, and were, subsidised either through profitable ones or from more general taxes (usually local authority rates).

Overnight (literally) this changed.  Anyone who satisfied very minimal safety standards could set up their own company, run on routes and frequencies they decided, and set pay and conditions as they wished. With only a few exceptions, the public sector could not subsidise unprofitable routes – and where they could, this was subject to a competitive tendering process.

So what happened? There were short-term and long term effects.  In the first couple of years, the existing large public sector owned companies stopped unprofitable routes and made many staff redundant. They sought ways of reducing wages and becoming more competitive – and in consequence suffered a good deal of industrial relations problems. At the same time, there was a glut of new entrants to the market – usually offering wages significantly below the existing rates – and a resulting increase in competition especially on profitable routes (something which became known as “bus wars”).

In the longer term however the situation changed and the market nationally became dominated by 4-5 big players who grew in the main by buying out competitors.  Very small companies, who could survive by being specialists, also thrived but usually on the fringes of the market.

What does this mean in the wider employment context? Well, it shows that in the absence of legislation economic factors would take an even greater role than they do now.

In a market like public transport, where there are low barriers to entry, and a plentiful source of labour, wages will fall. The market will, in this case, set a new “minimum wage” which will vary across industries and sectors.

Interestingly though, again based on the bus experience, existing employees are less likely to be affected – even though their employment rights have been abolished. Employers in the majority of cases will want to avoid the disruption to their existing workforce, especially if they are suddenly being faced by new competitors. Unless it makes them completely unviable financially, they are likely to want to retain staff to fight off competition, and facing internal “battles” over terms and conditions won’t do this. Most of the ex-public sector bus companies eventually concluded deals which retained existing staff conditions and only provided worse terms for new entrants.

Employers wouldn’t have it all their own way though – one of the other characteristics of the bus wars period was a high turnover of staff among the new entrant companies. Drivers had no loyalty to their employer and would often leave for a new employer for a small increase (say 50p an hour) in wages. In fact one of the ways the bigger companies reasserted their dominance was to pay at a rate that was higher than competitors (though lower than pre-deregulation levels).

Of course, not every industry is like the bus industry, where it is easy to recruit and train new employees. Where it is more difficult to recruit or more expensive to train people, the economic balance of power will shift. If I’m a whizz at coding or programming and sought after by several hi-tech companies, then I may well be able to name my price (this already happens in sport, most particularly football, where star players can and do receive extremely high salaries).  The economic power moves towards the employee.

And with the end of employment law, enforcing things like notice periods or restrictive clauses will become impossible for employers. An employee can, and will walk off the job, if they are unhappy with the way you manage them – and while in a recession you may be able to find an easy replacement it may be more difficult when times are good.

Moreover, for more mobile employees, leaving to work in other countries that offer better job security or protection may become an attractive option – potentially weakening the UK overall. (Indeed, a general reduction in wages as a consequence of the abolition of employment legislation would have a very negative effect on the UK economy as spending power would decrease)

Employees who are economically weak may also try to strengthen their bargaining power by forming unions. It’s worth remembering that unions originally came into existence at a time where there was virtually no employment law, in the early/mid 19th century, and there’s no reason to suppose this wouldn’t happen again.

The impact of social or cultural “norms” shouldn’t be underestimated. The fact that an employer could now sack a pregnant woman or refuse to employ anyone black doesn’t mean that this sort of behaviour would be considered acceptable by customers, suppliers or other stakeholders. It’s very easy to damage the reputation of a company, sometimes fatally, in these days of social media.

So, in the end, it all comes down to economic power. Employment legislation will be replaced by the rules of the market – which will vary from industry to industry and region to region. Existing workers may not see many immediate changes but the world would change – but not always to employers’ benefit.

Straw and Rifkind show the problem of managing staff with “second jobs”

There’s been much schadenfreude in the exposure of two former high ranking government ministers, Sir Malcolm Rifkind and Jack Straw, touting themselves for business and offering to sell their “influence” to a fictitious Chinese company. (In the interests of political neutrality one is from the Conservatives, one from Labour).  It’s provoked a debate about whether MPs should be banned from holding second jobs.

MPs aren’t employees. But the same issue of whether an employee can hold a second job is one I am often asked. So what is the situation?

Firstly, you can’t impose a blanket ban on individuals doing work when they aren’t working for you. Individuals have a right to spend their time outside work in whatever way they wish, which includes earning money. However, you do have a right to ensure that they are not doing anything which could damage your business –so you can legitimately prevent them from working for a competitor, or other organisation which might want access to your commercial information (a supplier or customer for example). As with all these things, should matters be challenged by the employee, you’d need to show that there was some clear impact on your business.

You can also prevent an employee from doing other work if it would stop them from working for you. So if someone wants to do an evening job starting at 6 but isn’t due to finish their shift with you till 7, then you can of course also prevent them from doing this.

The third key area is Health and Safety, particularly (and ironically given how much some employers seem to hate them) via the Working Time Regulations. These lay down the rules about the maximum 48 hour working week, rest breaks and time between shifts. If a member of staff works 35 hours a week for you (9 to 5 Mon-Fri say) and then wants to do 20 hours a week in a bar (say a four hour shift Wednesday/Thursday/Friday/Saturday/Sunday) you could try to prevent them from doing so on the grounds that they are working 55 hour weeks possibly without sufficient rest between shifts. Again, if you can show a clear safety risk (they operate machinery for example) it’s easier to do this.

With the advent of flexible working, zero hours contracts (where all parties have pledged to outlaw exclusivity clauses that prevent people from working for someone else), increased numbers of part-time roles and the growing number of “in-work poor” mean that for many employers, their staff may well have more than one job. Managing such situations may become increasingly common.