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LETS GET DOWN TO BUSINESS.

Question :
As an employer can I reduce staff hours to 80%, which still allows me to meet one of the requirements for the government subsidy? We are fielding a lot of similar type questions – especially regarding subsidies and hours – and there are lots of comments in the media on this so having sought legal opinion re my wording I have dropped in an immediate response to this question, which builds on one of the initial threads. I am sure others may also have thoughts.  

Question submitted 03/04/20 @ 03:29pm
Industry: HR & Talent
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  • Before any changes are made, each employer is responsible to review the individual terms and conditions of each relevant employee’s Employment Agreement. The Employment Agreement may set out a prescribed process or requirement.

    Whatever you set out to propose, ensure that you do your best to express empathy, tell a thorough story, and bring people along on a journey in which they perceive you to be fair and reasonable. Even the most robust process and outcomes can lead to an employee raising a personal grievance, if they feel that their employer has not been fair and reasonable.

    Please remember that each communication, whether to the employee or affecting the employee, is a discoverable document. This could include emails, texts etc. between Directors. Be careful not to predetermine an outcome.

    Prepare a business case that outlines:
    – Your current position – Good faith requires that employee receives all the financial information required to support the position.
    – Your predicted position (short-term and long-term) – this should include revenue and cashflow predictions
    – Any disclosure relevant to the position – e.g. disclosing the position on Government Wage Scheme Subsidy, and any declarations made during applying for this scheme
    – Any action that has been taken to mitigate the need to impact employees incl. banking assistance

    New Zealand Employment Law has not changed, therefore where an employer is looking to change an employee’s terms and conditions of employment, they require the consent of the employee – therefore employers are recommended to enter a robust communication process (that mirrors the formal process of Change consultation) when considering these changes.

    It is our position that where an Employer, in good faith, believes that they cannot sustain their normal operations or future operations, which may include not being able to sustain all employees at 100% of their usual pay, then an employer can enter into a formal Consultation Process with employees. This may include a proposed change to role requirements and should those proposed changes include a change to working hours, then this in turn would include a proposed impact on pay. So the requirements need to be reviewed team by team, and role by role. We recommend staying away from a simple application of 80% pay to all employees.

    Every employee must be given a genuine opportunity to provide feedback, input and make alternate suggestions. Every piece of employee feedback must be given consideration with an open-mind, and the thinking and decision must be documented.

    Remember that Employment Relations Authority will review any Personal Grievance in the position of hindsight, and advice is changing daily at present. What won’t change is the assessment, “What would a reasonable employer do in the circumstances?” Every decision must be fair and must be genuine.

    Thanks for posting this question Ken (and providing solutions).
    It highlights the importance of not rushing anything at this time, as tempting as that may be. While you may see the reduction of salary to 80% as a quick way to eke out cashflow across a longer period of time, and keep employees in employment longer, a change process has to be implemented – and absolutely with full disclosure. The employee has the right to ask what you, as a business, have done to exhaust all other financial avenues before asking for 20% of their contracted salary. The ERA certainly would, retrospectively.
    Also it would be good practice to ensure you have a fixed term applied to the time their salary is proposed to be reduced.
    Another consideration is to propose that out the other side of this, the 20% is paid back on top of the return to contracted base salary (at agreed terms e.g spread across a period of time as long as it is fair and reasonable)
    This is a good faith engagement. You’re both wanting to have a business and be employed through this and out the other side.

    Great questions, great insights, I have seen a lot of notes companies have given out to all staff this week on the consultation process – and for me, the more open and human (while being legal and respectful) the owners are with their team, I believe the better outcome for everyone including the team being supportive of the situation – we are all in this together.

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