Key Strategies to Consider Before Leaving Level 4

14 April 2020

While some essential businesses are trading strongly, most other businesses are extremely concerned about their revenue projections for the months ahead.

We recommend that you decide, before April 22 (the scheduled end date of Level 4), what changes to your business/operating model you will need after that date. The reason is that once non-essential businesses can trade again, it will be more difficult to make changes to hours of work and pay.

At present employees in non-essential businesses may be ready and willing to work but are not able to do so because the Government is requiring them to remain at home in the Level 4 lockdown (the same applies in Level 3).  That being the case, the employer has the ability to implement changes to hours of work and pay through a consultative restructure process.  That requires good faith but ultimately does not require agreement.

On the other hand, if you leave it until we reach Level 2 to make any required changes, that is more likely to require mutual agreement with affected staff, and that usually means not everyone agrees which can stymie your plans.

It is unlikely the return to “normal” trading will be a straight line, so you should consider setting a “floor” for hours of work and pay now, and retain the ability to flex up and down as circumstances change. 

Changes to your organisation structure could still be made through a consultative restructure process, provided you first consider whether you have used best endeavours to retain the employees on at least 80 percent of their regular income for the period of the subsidy.

Note that none of the above applies if your wage subsidy application was made after 4pm on 27 March, because the declaration you signed prevents you from making changes to terms and conditions without the written agreement of the relevant employee; and you are prevented from making any redundancies before 9 June 2020.

For some the wage subsidy could become more of a millstone than a beneficial form of assistance as time goes on, particularly where employees are paid well above minimum wage.

Having said that, if the commercial reality is that your business is unsustainable you may have no option but to restructure and declare redundancies, but as a minimum you would need to factor into that decision-making process, the obligation to repay the subsidy.

Call us for advice on your situation.