Can you reduce staff hours – and should you?

Reducing staff hours can be an effective cost cutting strategy, but it can cause issues too. HR consultant Gemma Dale weighs up the pros and cons of cutting employees' hours for the business.

The coronavirus pandemic has created challenging times for businesses, especially financially. The furlough scheme and associated grant/loan schemes have gone a long way to alleviating the financial burden on employers during lockdown; however, as the furlough scheme winds to a close, employers may be faced with the need to reduce their overheads through other means to ultimately keep the business afloat.

Reducing staff hours

Many businesses will consider temporarily or permanently reducing staff hours to retain staff while reducing overheads. Making a temporary or permanent reduction to an employee’s working hours is possible, but must be done carefully. Here we provide an overview of some considerations for employers who may choose to reduce staff hours. We advise that you consult with an employment solicitor or HR advisor on your specific situation before deciding to reduce staff hours.

How does reducing staff hours work?

How does reducing staff hours work

Reducing staff hours comes in two forms:

Reducing the number of hours they work (short-time working)
Suspending employment for one or more days (laying off)

According to Acas, employees continue to accrue holiday entitlement during lay-offs or short-time working and they should receive pay unless agreed otherwise or their contract allows reduced pay (see this Acas article for more information). It is also important that the employer communicates clearly and regularly about the proposed changes to the employee’s working hours, to keep the employee fully informed and to show that a process has been followed.

Before reducing staff hours…

Offering employees reduced working hours can be a viable alternative to making them redundant. However, this should not be a decision made lightly, as there are complexities around reducing staff hours fairly. Failure to take the correct steps and to consider a range of factors can put an employer at risk of a legal claim due to a breach of contract or discrimination.

Being able to successfully reduce an employee’s working hours in either regard requires you to consider the following:

What does it say in their contract?

Is it stated within the employee’s contract that there is the option to reduce their working hours according to the needs of the business and their role? If not, reducing their hours would require a contract renegotiation with the employee.

Jodie Hill, employment solicitor and CEO of Thrive Law, told us: "Varying contracts depends on the contractual relationship between the parties and how much of a change it is as to whether agreement is required. More often than not, it is required to avoid allegations of fundamental variations of contract and threats of claims."

What is the justification for reducing hours?

You will need to have a clear and reasonable justification for reducing an employee’s working hours – this could be that there has been a downturn in business, or a change in an employee’s role/duties, or a lack of work activities available.

For instance, the coronavirus pandemic has meant many businesses have had to close or greatly reduce their staff numbers – though the introduction of the UK government’s furlough scheme has meant a far lesser need for reducing staff hours during the lockdown situation.

Once the furlough scheme has come to an end, it is likely that businesses will continue to feel the knock-on effects of the pandemic and associated lockdown for some time to come. Reducing staff hours may be a viable and preferred alternative to making staff redundant.

How are you informing your employees?

Employers need to gain the employee’s agreement on the reduced hours – ideally this agreement should be written and recorded, for instance within your HR document management system, to show a paper trail as part of your HR document management best practices. The employer should then also provide written confirmation and notice of the change before the reduction in hours occurs.

Manage and send important HR documents at a company, team or individual level using HR software.

As Jodie Hill comments: "communication is key; whatever you decide to do, make sure you communicate with your team and hear what they have to say before making any changes. Keeping a paper trail is important to avoid conflict down the line."

The alternatives to reducing staff hours?

Alternatives to reducing staff hours

Reducing staff hours really should be a last resort before redundancies are required. Acas recommends the following alternative options, which can be less disruptive for the business and for the employee:

Taking holiday
Working more flexibly
Working from home
Taking unpaid leave

Jodie Hill also highlighted some alternative options to reducing hours: "when reducing hours, always consider alternatives first. For example, where someone was furloughed prior to June 10th, can you furlough them for the hours you don’t need, rather than simply cutting their wage, and place them on flexible furlough instead? Or can you ask people to take leave or work flexibly?"

Ultimately, communication is key – bringing employees on the business journey can be a powerful way to keep everyone engaged, even through tough times.

The above should be construed as general information and not legal or HR advice. We strongly recommend consulting with an employment solicitor or HR advisor on your specific situation before taking any action.

Written by Gemma Dale

Gemma Dale is an experienced senior HR professional, CIPD Chartered Fellow, HEA Fellow, and a regular speaker and writer on a variety of HR topics. Gemma is the co-author of the book 'Flexible Working' published by Kogan Page in 2020. She is also a lecturer in the Business School at Liverpool John Moores University and runs her own business, The Work Consultancy.