Covid 19: How to approach job losses

23 March 2020

The response to Covid 19 means that the majority of business, large and small, will be facing the prospect of job losses. The criteria surrounding access to Government subsidies unfortunately will mean that many will still lose their jobs. Whether you are an employer or an employee, it is important that we think laterally about how we can navigate through this crisis while trying to keep the economy intact.

Here is my advice to businesses and employees:

Get good information

Whilst nobody fully knows how this may play out, get your information from reliable sources. Prefer Government information and mainstream media over what you read on social media. This is not the time for conspiracy theories or non-evidence-based speculation. As an employer, be responsible about the information you are relying upon to make decisions concerning others’ livelihoods. Be prepared for what might happen, but don’t jump the gun.

Be flexible

The situation could get better or it could get worse – nobody really knows because we are dealing with something we can’t control. The purpose of going hard and going early (the “Hammer” approach) is to buy time to build up capability in our health system to deal with cases. Restrictions will eventually be eased (this phase is called the “Dance”) and it maybe sooner or longer than you think. Your business needs to be ready to respond, whichever way it goes.

New hires who haven’t started

If you have offered employment to someone (which they have accepted) but they haven’t started work, then you will need to consider whether to commence employment. These prospective employees are still governed by the duty of good faith and where there has been acceptance of an offer, there is an employment relationship. Therefore, first consider whether suspending the commencement date is an option – this will give you time to consider whether to go ahead with the employment. If that’s not an option, then redundancy is the next step. I don’t know many employment agreements that have ‘force majeure’ clauses (clauses that allow you to cancel the agreement due to circumstances outside of the reasonable control of both parties) and force majeure is not a term commonly used in the employment context. My recommendation is therefore to stick to a redundancy process because whether you rely on redundancy or force majeure, you must still comply with the duty of good faith. If you have offered employment to someone who hasn’t accepted that offer, then you can withdraw the offer, but I recommend discussing it with them first as part of the duty of good faith. A verbal acceptance of an offer is still an acceptance.

Alternatives to Redundancy

Whilst redundancies are inevitable, think laterally about alternatives. Here are some suggestions:

a.Government subsidy: whilst you may not meet the criteria today, that may change tomorrow, either because your situation changes or the criteria changes. Stay open to the possibility that Government help may be available, even if it isn’t today.

b.Talk to your bank: if you are repaying finance see whether you can go on a payment holiday. Enquire about loan facilities. Liquidity will give you more options.

c.Reduced hours: for many people, working reduced hours (and pay) will be a better option to redundancy. If employees can arrange a mortgage repayment holiday, then a reduced income will be preferable to a benefit and will keep them occupied.

d.Suspend employment: rather than terminate someone’s employment, consider whether you can suspend their employment instead (effectively leave without pay). Your employee then stays on your books and you can offer hours later if things improve. At the same time, relax any restrictions around secondary employment. This could be important for employees on a work-related visa who need to demonstrate employment. Hopefully, under government criteria an employment suspension will not restrict access to benefits, so be prepared to review this if it does.

e.Job share: if you cut too many roles then you may come unstuck if your remaining employees get sick or must self-isolate or if things improve. Having two people doing 20 hours each may be better than one person working 40 hours. This then gives you the flexibility to quickly scale up when things get better.

f.Alternative pay arrangements: are there different ways you can pay your employees, or can you reduce pay to retain employees (subject to the minimum wage)? A temporary reduction in pay, combined with a mortgage holiday may suit some employees.


Whilst under Levels 3 & 4, the Government may suspend personal grievances arising from redundancies (thereby avoiding the need for consultation), the employment relationship is built around the principle of good faith. If you are anticipating structural changes to your business (even if it could be weeks away) my advice is to start consultation now about possible change and then keep the consultation loop going until we move out of the crisis. Creating an open channel of communication now with your employees allows for a continuous feedback loop and enables you to make quick decisions as circumstances change. Don’t keep your thinking to yourself and then spring it on employees later. Your reputation as a business will depend on your ability to be transparent and open. Everyone will understand the need to make change, so you just need to demonstrate that you are being thoughtful in your decision-making and taking your employees’ views into account. It is likely that some employees will make their own decisions about employment based on changes they need to make to their personal lives (e.g. taking on full time childcare or relocating). It is important that everyone understands each other’s position so good decisions can be made and that requires an open and continuous channel of communication. I have put some suggested wording at the bottom of this blog which you can insert into a memo or consultation document.

Mental Health

Once we are through the initial shock of adapting to a new way of life, pay close attention to your employees’ mental health and your own mental health. Peoples’ resilience to stressful situations will differ and employees may need to take time out to regroup. Don’t be afraid to reach out to professionals and trained coaches. You will be surprised how just talking to someone outside of your business or family can help relieve stress and enable clear headed thinking.

As a business owner, not only so we have a responsibility to look after the welfare of our employees, but we also have a responsibility to take care of the economy. Make sure your decisions are taken with careful consideration rather than panic and stay compassionate. We all need to make sacrifices to get through this, but united we can do this.

Suggested Consultation Wording

We have set out above some potential options and changes we may need to make in the business in the foreseeable future. Some of these changes may need to be made quickly to ensure our business survives this crisis. We are therefore seeking your feedback on potential options for the business now to allow us to make quick decisions should the need arise. We also want to reassure you that we take your views and feedback seriously, and, as we continue to monitor the situation, we will remain open to receiving your feedback. Decisions which we make will also be subject to continuous review as circumstances change and therefore, we invite you to keep communicating your thoughts as we work through this together.
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