Even with the wage subsidies, many companies will struggle to stay viable and, in some cases, will need to consider making changes to their business which could impact the number of people employed.
In the first instance, employers should explore all reasonable alternatives, such as seeking an employee’s agreement to reduce their pay to no more than the value of the wage subsidy (bearing in mind that the wage subsidy will not be available unless the employer can demonstrate that they have made “best efforts” to pay employees at least 80% of their normal income), to take leave without pay, reducing employees’ hours or requesting that employees take annual holidays.
However, in the event that employees do not agree to any such changes, or even with employee agreement to changes, and an employer needs to make structural changes in order to stay viable, they could commence a restructuring process.
As described above, even though the circumstances are very difficult, employers will still be expected, in almost all cases, to consult fairly with staff regarding what is proposed. If you are in the position where you need to consider such changes, we recommend that you get in touch to discuss what such a process would look like.
We note that, where you have received the wage subsidy that will likely undermine the justification for making employees redundant if the justification is based on an inability to pay employees. That is because, if employees are prepared to agree to reduce their salary or wage to the value of the subsidy, the employer’s wage cost should be zero. The justification for changes would, in that case, need to be something other than the ongoing cost of wages.